Some Maha Energy AB (publ) (STO:MAHA A) Analysts Just Made A Major Cut To Next Year's Estimates

The analysts covering Maha Energy AB (publ) (STO:MAHA A) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Maha Energy's three analysts are now forecasting revenues of US$113m in 2022. This would be a sizeable 56% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 117% to US$0.51. Before this latest update, the analysts had been forecasting revenues of US$133m and earnings per share (EPS) of US$0.63 in 2022. Indeed, we can see that the analysts are a lot more bearish about Maha Energy's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Maha Energy

Despite the cuts to forecast earnings, there was no real change to the US$2.41 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic Maha Energy analyst has a price target of US$26.41 per share, while the most pessimistic values it at US$22.50. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Maha Energy's rate of growth is expected to accelerate meaningfully, with the forecast 81% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 31% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 6.4% annually. So it's clear with the acceleration in growth, Maha Energy is expected to grow meaningfully 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 Maha Energy. 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 this year, we wouldn't be surprised if investors were a bit wary of Maha Energy.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Maha 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.