Downgrade: Here's How Analysts See PGE Polska Grupa Energetyczna S.A. (WSE:PGE) Performing In The Near Term

The latest analyst coverage could presage a bad day for PGE Polska Grupa Energetyczna S.A. (WSE:PGE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from PGE Polska Grupa Energetyczna's five analysts is for revenues of zł90b in 2023 which - if met - would reflect a huge 23% increase on its sales over the past 12 months. Statutory earnings per share are presumed to accumulate 2.4% to zł1.52. Previously, the analysts had been modelling revenues of zł101b and earnings per share (EPS) of zł1.92 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for PGE Polska Grupa Energetyczna

The average price target climbed 6.3% to zł10.44 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. 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. The most optimistic PGE Polska Grupa Energetyczna analyst has a price target of zł14.40 per share, while the most pessimistic values it at zł7.30. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of PGE Polska Grupa Energetyczna'shistorical trends, as the 23% annualised revenue growth to the end of 2023 is roughly in line with the 20% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 5.1% annually. So not only is PGE Polska Grupa Energetyczna expected to maintain its revenue growth despite the wider downturn, it's also forecast to grow faster than the industry as a whole.

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 PGE Polska Grupa Energetyczna. 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 increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple PGE Polska Grupa Energetyczna analysts - going out to 2025, and you can see them free on our platform here.

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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.