Brokers Are Upgrading Their Views On BW LPG Limited (OB:BWLPG) With These New Forecasts

BW LPG Limited (OB:BWLPG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 19% to kr107 in the last 7 days. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

After the upgrade, the consensus from BWG's four analysts is for revenues of US$671m in 2023, which would reflect a sizeable 69% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to rise 9.6% to US$2.47. Prior to this update, the analysts had been forecasting revenues of US$593m and earnings per share (EPS) of US$1.90 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for BWG

It will come as no surprise to learn that the analysts have increased their price target for BWG 9.3% to US$11.83 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values BWG at US$155 per share, while the most bearish prices it at US$98.72. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 69% by the end of 2023. This indicates a significant reduction from annual growth of 21% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 10% per year. The forecasts do look bearish for BWG, since they're expecting it to shrink faster than the industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates, with sales apparently performing well even though revenue growth expected to decline against the wider market this year. With a serious upgrade to expectations and a rising price target, it might be time to take another look at BWG.

Analysts are clearly in love with BWG at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as its declining profit margins. For more information, you can click through to our platform to learn more about this and the 2 other warning signs we've identified .

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.