One Rubicon Water Limited (ASX:RWL) Analyst Just Cut Their EPS Forecasts
The latest analyst coverage could presage a bad day for Rubicon Water Limited (ASX:RWL), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
After the downgrade, the one analyst covering Rubicon Water is now predicting revenues of AU$73m in 2027. If met, this would reflect a sizeable 20% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 83% to AU$0.011. Yet prior to the latest estimates, the analyst had been forecasting revenues of AU$89m and losses of AU$0.003 per share in 2027. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
See our latest analysis for Rubicon Water
The analyst lifted their price target 9.1% to AU$0.36, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value.
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. One thing stands out from these estimates, which is that Rubicon Water is forecast to grow faster in the future than it has in the past, with revenues expected to display 20% annualised growth until the end of 2027. If achieved, this would be a much better result than the 3.1% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 15% annually. So it looks like Rubicon Water is expected to grow faster than its competitors, at least for a while.
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 Rubicon Water. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Rubicon Water going out as far as 2029, and you can see them free on our platform here.
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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.