Endeavour Silver Corp. (TSE:EDR) shares fell 9.8% to CA$2.95 in the week since its latest third-quarter results. Results look to have been somewhat negative – revenue fell 3.4% short of analyst estimates at US$28m, although losses were a relative bright spot. The per-share loss was US$0.05, 54% smaller than analysts were expecting prior to the result. 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. We’ve gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Endeavour Silver’s five analysts is for revenues of US$165m in 2020, which would reflect a substantial 37% increase on its sales over the past 12 months. Endeavour Silver is also expected to turn profitable, with earnings of US$0.04 per share. In the lead-up to this report, analysts had been modelling revenues of US$182m and earnings per share (EPS) of US$0.025 in 2020. Although analysts have lowered their sales forecasts, they’ve also made a sizeable expansion in their earnings per share estimates, which implies there’s been something of an uptick in sentiment following the latest results.
Analysts have cut their price target 6.9% to CA$3.13 per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Endeavour Silver at CA$4.20 per share, while the most bearish prices it at CA$3.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. One thing stands out from these estimates, which is that analysts are forecasting Endeavour Silver to grow faster in the future than it has in the past, with revenues expected to grow 37%. If achieved, this would be a much better result than the 8.9% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 7.2% next year. So it looks like Endeavour Silver is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Endeavour Silver following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Still, earnings per share are more important to value creation for shareholders. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Endeavour Silver’s future valuation.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Endeavour Silver going out to 2021, and you can see them free on our platform here..
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