The analysts covering Centerra Gold Inc. (TSE:CG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After this downgrade, Centerra Gold's eight analysts are now forecasting revenues of US$1.8b in 2021. This would be a modest 5.4% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 47% to US$2.04. Previously, the analysts had been modelling revenues of US$2.0b and earnings per share (EPS) of US$2.25 in 2021. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a small dip in EPS estimates to boot.
Analysts made no major changes to their price target of US$15.18, suggesting the downgrades are not expected to have a long-term impact on Centerra Gold's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Centerra Gold analyst has a price target of US$27.91 per share, while the most pessimistic values it at US$15.40. 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.
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. It's pretty clear that there is an expectation that Centerra Gold's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 5.4% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.6% per year. Factoring in the forecast slowdown in growth, it seems obvious that Centerra Gold is also expected to grow slower than other industry participants.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Centerra Gold. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Centerra Gold's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Centerra Gold going forwards.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Centerra Gold 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.
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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