Today is shaping up negative for ENCE Energía y Celulosa, S.A. (BME:ENC) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the current consensus from ENCE Energía y Celulosa's five analysts is for revenues of €774m in 2020 which - if met - would reflect a modest 4.6% increase on its sales over the past 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting €0.10 in per-share earnings €0.10. Before this latest update, the analysts had been forecasting revenues of €866m and earnings per share (EPS) of €0.22 in 2020. Indeed, we can see that the analysts are a lot more bearish about ENCE Energía y Celulosa's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 11% to €4.47, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on ENCE Energía y Celulosa, with the most bullish analyst valuing it at €5.20 and the most bearish at €3.90 per share. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that ENCE Energía y Celulosa is an easy business to forecast or that the underlying assumptions are knowable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that forecasts expect a continuation of ENCE Energía y Celulosa'shistorical trends, as next year's 4.6% revenue growth is roughly in line with 5.5% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 2.3% per year. So it's pretty clear that ENCE Energía y Celulosa is forecast to grow substantially faster than its 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 ENCE Energía y Celulosa. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of ENCE Energía y Celulosa.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ENCE Energía y Celulosa going out to 2022, 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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