Analyst Forecasts For BW LPG Limited (OB:BWLPG) Are Surging Higher

Shareholders in BW LPG Limited (OB:BWLPG) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.

Following the upgrade, the consensus from four analysts covering BWG is for revenues of US$480m in 2023, implying a stressful 41% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 60% to US$0.60 in the same period. Before this latest update, the analysts had been forecasting revenues of US$432m and earnings per share (EPS) of US$0.25 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for BWG

Despite these upgrades, the analysts have not made any major changes to their price target of US$9.85, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic BWG analyst has a price target of US$117 per share, while the most pessimistic values it at US$87.07. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2023. This indicates a significant reduction from annual growth of 10% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 9.9% annually for the foreseeable future. The forecasts do look bearish for BWG, since they're expecting it to shrink faster than the industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Notably, analysts also upgraded their revenue estimates, with sales performing well although BWG's revenue growth is expected to trail that of the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So BWG could be a good candidate for more research.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for BWG 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 upgrading 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.