Market forces rained on the parade of Gran Tierra Energy Inc. (NYSEMKT:GTE) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the four analysts covering Gran Tierra Energy are now predicting revenues of US$465m in 2021. If met, this would reflect a substantial 95% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$552m in 2021. The consensus view seems to have become more pessimistic on Gran Tierra Energy, noting the measurable cut to revenue estimates in this update.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Gran Tierra Energy's rate of growth is expected to accelerate meaningfully, with the forecast 95% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 9.9% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.6% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Gran Tierra Energy is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow faster 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 Gran Tierra Energy after today.
Want more information? At least one of Gran Tierra Energy's four analysts has provided estimates out to 2025, which can be seen for 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.
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