Last week, you might have seen that Argonaut Gold Inc. (TSE:AR) released its annual result to the market. The early response was not positive, with shares down 4.2% to CA$1.49 in the past week. Revenues came in at US$269m, in line with estimates, while Argonaut Gold reported a statutory loss of US$0.52 per share, well short of prior analyst forecasts for a profit. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Argonaut Gold after the latest results.
Taking into account the latest results, Argonaut Gold’s five analysts currently expect revenues in 2020 to be US$268.8m, approximately in line with the last 12 months. Earnings are expected to improve, with Argonaut Gold forecast to report a statutory profit of US$0.18 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$318.4m and earnings per share (EPS) of US$0.32 in 2020. It looks like analyst sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a pretty serious reduction to consensus earnings per share numbers as well.
It’ll come as no surprise then, to learn that analysts have cut their price target 12% to US$2.29. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Argonaut Gold analyst has a price target of US$2.86 per share, while the most pessimistic values it at US$1.88. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Argonaut Gold’s past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 0.03% revenue decline a notable change from historical growth of 8.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 6.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – analysts also expect Argonaut Gold to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Argonaut Gold. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Argonaut Gold analysts – going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Argonaut Gold Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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