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One thing we could say about the analysts on Pharos Energy plc (LON:PHAR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the most recent consensus for Pharos Energy from its twin analysts is for revenues of US$201m in 2022 which, if met, would be a major 62% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$243m in 2022. It looks like forecasts have become a fair bit less optimistic on Pharos Energy, given the measurable cut to revenue estimates.
Check out our latest analysis for Pharos Energy
We'd point out that there was no major changes to their price target of US$0.61, suggesting the latest estimates were not enough to shift their view on the value of the business. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Pharos Energy analyst has a price target of US$0.59 per share, while the most pessimistic values it at US$0.30. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Pharos Energy shareholders.
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. For example, we noticed that Pharos Energy's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 62% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 1.7% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.6% annually. So it looks like Pharos Energy is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Pharos Energy this year. They're also forecasting more rapid revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Pharos Energy after today.