The analysts covering Saturn Oil & Gas Inc. (CVE:SOIL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the latest consensus from Saturn Oil & Gas' three analysts is for revenues of CA$203m in 2022, which would reflect a sizeable 29% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 59% to CA$2.04. Previously, the analysts had been modelling revenues of CA$244m and earnings per share (EPS) of CA$0.27 in 2022. So we can see that the consensus has become notably more bearish on Saturn Oil & Gas' outlook with these numbers, making a measurable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
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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. It's pretty clear that there is an expectation that Saturn Oil & Gas' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 41% growth on an annualised basis. This is compared to a historical growth rate of 78% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 1.3% annually. So it's pretty clear that, while Saturn Oil & Gas' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The biggest low-light for us was that the forecasts for Saturn Oil & Gas dropped from profits to a loss this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Saturn Oil & Gas going forwards.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Saturn Oil & Gas' business, like major dilution from new stock issuance in the past year. Learn more, and discover the 4 other warning signs we've identified, for free on our platform here.