The Champion Iron Limited (ASX:CIA) Yearly Results Are Out And Analysts Have Published New Forecasts

The yearly results for Champion Iron Limited (ASX:CIA) were released last week, making it a good time to revisit its performance. Results look mixed - while revenue fell marginally short of analyst estimates at CA$1.5b, statutory earnings beat expectations 3.9%, with Champion Iron reporting profits of CA$1.03 per share. Following the result, the 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 the analysts have changed their mind on Champion Iron after the latest results.

Check out our latest analysis for Champion Iron

Following the latest results, Champion Iron's twelve analysts are now forecasting revenues of CA$1.76b in 2023. This would be a huge 20% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to sink 10% to CA$0.91 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$1.74b and earnings per share (EPS) of CA$0.93 in 2023. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at AU$8.68, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Champion Iron, with the most bullish analyst valuing it at AU$9.05 and the most bearish at AU$7.93 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

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 Champion Iron's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 20% growth on an annualised basis. This is compared to a historical growth rate of 50% over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 0.04% annually. Factoring in the forecast slowdown in growth, it's pretty clear that Champion Iron is still expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, they made no changes to their revenue estimates - and they expect sales to perform better than the wider industry. The consensus price target held steady at AU$8.68, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Champion Iron. Long-term earnings power is much more important than next year's profits. We have forecasts for Champion Iron going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 4 warning signs for Champion Iron (of which 2 can't be ignored!) you should know about.

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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.