Advertisement
UK markets closed
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • FTSE 250

    19,884.73
    +74.07 (+0.37%)
     
  • AIM

    743.26
    +1.15 (+0.15%)
     
  • GBP/EUR

    1.1717
    +0.0023 (+0.20%)
     
  • GBP/USD

    1.2622
    -0.0000 (-0.00%)
     
  • Bitcoin GBP

    55,382.95
    -404.45 (-0.72%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • CAC 40

    8,205.81
    +1.00 (+0.01%)
     

Rainbows and Unicorns: RWE Aktiengesellschaft (ETR:RWE) Analysts Just Became A Lot More Optimistic

Celebrations may be in order for RWE Aktiengesellschaft (ETR:RWE) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.

Following the latest upgrade, the current consensus, from the ten analysts covering RWE, is for revenues of €36b in 2023, which would reflect a noticeable 6.8% reduction in RWE's sales over the past 12 months. Per-share earnings are expected to jump 16,833% to €3.76. Before this latest update, the analysts had been forecasting revenues of €29b and earnings per share (EPS) of €2.74 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for RWE

earnings-and-revenue-growth
earnings-and-revenue-growth

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of €51.26, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values RWE at €59.00 per share, while the most bearish prices it at €41.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

ADVERTISEMENT

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. We would highlight that sales are expected to reverse, with a forecast 5.5% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 17% 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 5.4% annually for the foreseeable future. It's pretty clear that RWE's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for next year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to next year's earnings expectations, it might be time to take another look at RWE.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 5 potential risks with RWE, including its declining profit margins. You can learn more, and discover the 3 other risks we've identified, for 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here