Cenovus Energy Inc. (TSE:CVE) 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.
Following the upgrade, the current consensus from Cenovus Energy's four analysts is for revenues of CA$74b in 2022 which - if met - would reflect a major 59% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 1,354% to CA$4.06. Before this latest update, the analysts had been forecasting revenues of CA$62b and earnings per share (EPS) of CA$3.77 in 2022. Sentiment certainly seems to have improved in recent times, with a substantial gain in revenue and a small lift in earnings per share estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of CA$27.21, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Cenovus Energy analyst has a price target of CA$38.00 per share, while the most pessimistic values it at CA$21.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cenovus Energy's past performance and to peers in the same industry. It's clear from the latest estimates that Cenovus Energy's rate of growth is expected to accelerate meaningfully, with the forecast 59% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 16% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.7% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Cenovus Energy is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Cenovus Energy.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Cenovus Energy going out to 2024, and you can see them free on our platform here..
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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.