Analysts Are Betting On Civeo Corporation (NYSE:CVEO) With A Big Upgrade This Week
Civeo Corporation (NYSE:CVEO) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Civeo has also found favour with investors, with the stock up a magnificent 66% to US$0.83 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
After the upgrade, the consensus from Civeo's dual analysts is for revenues of US$484m in 2020, which would reflect a considerable 12% decline in sales compared to the last year of performance. The loss per share is expected to ameliorate slightly, reducing to US$0.90. However, before this estimates update, the consensus had been expecting revenues of US$423m and US$0.72 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share forecasts to reflect the cost of achieving this growth.
Check out our latest analysis for Civeo
It will come as a surprise to learn that the consensus price target rose 6.5% to US$1.65, with the analysts clearly more interested in growing revenue, even as losses intensify. 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 Civeo analyst has a price target of US$2.50 per share, while the most pessimistic values it at US$0.80. 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. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past five years, revenues have declined around 1.4% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 12% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.8% per year. So while a broad number of companies are forecast to grow, unfortunately Civeo is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Civeo. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Civeo.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2022, which can be seen 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.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
