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One High Arctic Energy Services Inc (TSE:HWO) Analyst Just Cut Their EPS Forecasts

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Today is shaping up negative for High Arctic Energy Services Inc (TSE:HWO) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of CA$0.96 reflecting a 14% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the solitary analyst covering High Arctic Energy Services provided consensus estimates of CA$84m revenue in 2021, which would reflect a sizeable 28% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching CA$0.38 per share. However, before this estimates update, the consensus had been expecting revenues of CA$104m and CA$0.29 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for High Arctic Energy Services

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earnings-and-revenue-growth

The analyst lifted their price target 12% to CA$2.38, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. Currently, the most bullish analyst values High Arctic Energy Services at CA$3.40 per share, while the most bearish prices it at CA$1.35. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 5.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 28% 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 6.3% per year. So it's pretty clear that, while it does have declining revenues, the analyst also expect High Arctic Energy Services to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for High Arctic Energy Services going out as far as 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.

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.