Analysts Are More Bearish On Orion Energy Systems, Inc. (NASDAQ:OESX) Than They Used To Be

Market forces rained on the parade of Orion Energy Systems, Inc. (NASDAQ:OESX) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, Orion Energy Systems' three analysts currently expect revenues in 2023 to be US$125m, approximately in line with the last 12 months. Statutory earnings per share are anticipated to plunge 25% to US$0.15 in the same period. Previously, the analysts had been modelling revenues of US$145m and earnings per share (EPS) of US$0.24 in 2023. Indeed, we can see that the analysts are a lot more bearish about Orion Energy Systems' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Orion Energy Systems

Analysts made no major changes to their price target of US$5.63, suggesting the downgrades are not expected to have a long-term impact on Orion Energy Systems' 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. Currently, the most bullish analyst values Orion Energy Systems at US$12.00 per share, while the most bearish prices it at US$2.50. 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. 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. It's pretty clear that there is an expectation that Orion Energy Systems' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 0.1% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Orion Energy Systems.

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 Orion Energy Systems. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. 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 Orion Energy Systems.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Orion Energy Systems analysts - going out to 2025, 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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