Need To Know: Analysts Just Made A Substantial Cut To Their ENEA S.A. (WSE:ENA) Estimates

The latest analyst coverage could presage a bad day for ENEA S.A. (WSE:ENA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the four analysts covering ENEA are now predicting revenues of zł35b in 2023. If met, this would reflect a substantial 22% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to shrink 4.5% to zł2.14 in the same period. Before this latest update, the analysts had been forecasting revenues of zł40b and earnings per share (EPS) of zł2.72 in 2023. Indeed, we can see that the analysts are a lot more bearish about ENEA's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Our analysis indicates that ENA is potentially undervalued!

Analysts made no major changes to their price target of zł13.50, suggesting the downgrades are not expected to have a long-term impact on ENEA's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ENEA analyst has a price target of zł21.40 per share, while the most pessimistic values it at zł8.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that forecasts expect a continuation of ENEA'shistorical trends, as the 18% annualised revenue growth to the end of 2023 is roughly in line with the 18% annual revenue growth over the past five years. Compare this with the broader industry (in aggregate), which analyst estimates suggest will see revenues fall 1.4% per year. So it's clear that not only is revenue growth expected to be maintained, but ENEA is expected to grow meaningfully faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. 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 ENEA.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with ENEA's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other flag we've identified.

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.