Analysts Just Shaved Their BW Energy Limited (OB:BWE) Forecasts Dramatically

One thing we could say about the analysts on BW Energy Limited (OB:BWE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, BW Energy's four analysts are now forecasting revenues of US$684m in 2023. This would be a huge 173% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 419% to US$0.96. Prior to this update, the analysts had been forecasting revenues of US$724m and earnings per share (EPS) of US$1.07 in 2023. The forecasts seem less optimistic after the new consensus numbers, with lower sales estimates and making a considerable drop in earnings per share forecasts.

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Despite the cuts to forecast earnings, there was no real change to the US$4.15 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values BW Energy at US$49.70 per share, while the most bearish prices it at US$32.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting BW Energy's growth to accelerate, with the forecast 123% annualised growth to the end of 2023 ranking favourably alongside historical growth of 10% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 9.0% per year. It seems obvious that as part of the brighter growth outlook, BW Energy is expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for BW Energy. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of BW Energy.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple BW Energy analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.