Some Orion Energy Systems, Inc. (NASDAQ:OESX) Analysts Just Made A Major Cut To Next Year's Estimates

Today is shaping up negative for Orion Energy Systems, Inc. (NASDAQ:OESX) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the consensus from Orion Energy Systems' three analysts is for revenues of US$83m in 2023, which would reflect a noticeable 5.8% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$0.26 per share. However, before this estimates update, the consensus had been expecting revenues of US$99m and US$0.16 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Orion Energy Systems

The consensus price target fell 7.7% to US$4.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Orion Energy Systems at US$7.00 per share, while the most bearish prices it at US$2.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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 11% by the end of 2023. This indicates a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.8% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Orion Energy Systems is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt 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.

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.