One thing we could say about the analysts on Orion Energy Systems, Inc. (NASDAQ:OESX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the three analysts covering Orion Energy Systems provided consensus estimates of US$92m revenue in 2021, which would reflect a substantial 39% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.067 per share in 2021. Prior to this update, the analysts had been forecasting revenues of US$139m and earnings per share (EPS) of US$0.34 in 2021. There looks to have been a major change in sentiment regarding Orion Energy Systems' prospects, with a pretty serious reduction to revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target was broadly unchanged at US$7.19, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Orion Energy Systems analyst has a price target of US$10.00 per share, while the most pessimistic values it at US$5.75. 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 Orion Energy Systems shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Orion Energy Systems' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 39% revenue decline a notable change from historical growth of 12% 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 4.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Orion Energy Systems is expected to lag the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Orion Energy Systems dropped from profits to a loss this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Orion Energy Systems' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Orion Energy Systems.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Orion Energy Systems going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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. Thank you for reading.