Market forces rained on the parade of Capricorn Energy PLC (LON:CNE) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the eight analysts covering Capricorn Energy provided consensus estimates of US$273m revenue in 2021, which would reflect a painful 31% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 54% to US$0.11. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$306m and losses of US$0.069 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Capricorn Energy

There was no major change to the consensus price target of US$2.97, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Capricorn Energy, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$1.27 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 52% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 42% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Capricorn Energy is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Capricorn Energy. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Capricorn Energy's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Capricorn Energy after the downgrade.