Market forces rained on the parade of Centerra Gold Inc. (TSE:CG) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the consensus from six analysts covering Centerra Gold is for revenues of US$847m in 2022, implying an uneasy 13% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$1.1b of revenue in 2022. The consensus view seems to have become more pessimistic on Centerra Gold, noting the sizeable cut to revenue estimates in this update.
The consensus price target fell 12% to US$8.39, with the analysts clearly less optimistic about Centerra Gold’s valuation following this update. 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$15.08 per share, while the most pessimistic values it at US$8.14. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 7.2% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 24% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 12% annually. So while a broad number of companies are forecast to grow, unfortunately Centerra Gold is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They’re also anticipating slower revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn’t be surprised if the market became a lot more cautious on Centerra Gold after today.
Looking for more information? We have estimates for Centerra Gold from its six analysts out until 2024, 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. 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.
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