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Earnings Release: Here's Why Analysts Cut Their Painted Pony Energy Ltd. Price Target To CA$0.77

·4 min read

Painted Pony Energy Ltd. (TSE:PONY) just released its latest yearly results and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of CA$298m leading estimates by 3.5%. Statutory losses were smaller than analysts expected, coming in at CA$1.45 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Painted Pony Energy

TSX:PONY Past and Future Earnings, March 15th 2020
TSX:PONY Past and Future Earnings, March 15th 2020

After the latest results, the consensus from Painted Pony Energy's three analysts is for revenues of CA$272.7m in 2020, which would reflect a nervous 8.5% decline in sales compared to the last year of performance. Per-share statutory losses are expected to explode, reaching CA$0.16 per share. Before this earnings announcement, analysts had been forecasting revenues of CA$301.1m and losses of CA$0.19 per share in 2020. Although analysts have lowered their sales forecasts, they've also made a decent improvement in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.

The consensus price target fell 24% to CA$0.77, with the dip in revenue estimates clearly souring analyst sentiment, despite the forecast reduction in losses. 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 Painted Pony Energy at CA$1.75 per share, while the most bearish prices it at CA$0.20. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Painted Pony Energy's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 8.5% revenue decline a notable change from historical growth of 31% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 2.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Painted Pony Energy to grow slower than the wider market.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the long-term value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Painted Pony Energy. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Painted Pony Energy going out to 2021, and you can see them free on our platform here..

You can also see whether Painted Pony Energy is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.