Investors in Advantage Oil & Gas Ltd. (TSE:AAV) had a good week, as its shares rose 4.0% to close at CA$2.60 following the release of its full-year results. Revenues of CA$236m came in 3.7% below estimates, but statutory losses were slightly better than expected, at CA$1.51 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Advantage Oil & Gas after the latest results.

View our latest analysis for Advantage Oil & Gas

Taking into account the latest results, the current consensus from Advantage Oil & Gas' three analysts is for revenues of CA$369.7m in 2021, which would reflect a substantial 57% increase on its sales over the past 12 months. Earnings are expected to improve, with Advantage Oil & Gas forecast to report a statutory profit of CA$0.18 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$349.1m and earnings per share (EPS) of CA$0.27 in 2021. So it's pretty clear the analysts have mixed opinions on Advantage Oil & Gas after the latest results; even though they upped their revenue numbers, it came at the cost of a pretty serious reduction to per-share earnings expectations.

The analysts also upgraded Advantage Oil & Gas' price target 7.1% to CA$3.79, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. 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. Currently, the most bullish analyst values Advantage Oil & Gas at CA$5.25 per share, while the most bearish prices it at CA$2.25. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Advantage Oil & Gas' past performance and to peers in the same industry. It's clear from the latest estimates that Advantage Oil & Gas' rate of growth is expected to accelerate meaningfully, with the forecast 57% revenue growth noticeably faster than its historical growth of 12%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Advantage Oil & Gas to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Advantage Oil & Gas. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Advantage Oil & Gas analysts - going out to 2022, and you can see them free on our platform here.

Even so, be aware that Advantage Oil & Gas is showing 3 warning signs in our investment analysis , and 1 of those is significant...

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.

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