Industry Analysts Just Made A Substantial Upgrade To Their Eneti Inc. (NYSE:NETI) Revenue Forecasts

Celebrations may be in order for Eneti Inc. (NYSE:NETI) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Eneti shares have been sold down a little recently, so investors may be hoping the latest upgrade changes the market's appetite for the business. At US$7.29, the stock is 5.1% below where it was a week ago.

Following the upgrade, the consensus from four analysts covering Eneti is for revenues of US$156m in 2022, implying a considerable 14% decline in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$141m in 2022. The consensus has definitely become more optimistic, showing a nice increase in revenue forecasts.

See our latest analysis for Eneti

The consensus price target fell 9.4% to US$17.67, with the analysts clearly less optimistic about Eneti's valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Eneti analyst has a price target of US$28.00 per share, while the most pessimistic values it at US$10.00. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 12% by the end of 2022. This indicates a significant reduction from annual growth of 10% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Eneti is expected to lag the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for next year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Eneti.

Analysts are clearly in love with Eneti at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as major dilution from new stock issuance in the past year. You can learn more, and discover the 1 other risk we've identified, for 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 upgrading 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.