Deterra Royalties Limited (ASX:DRR) just released its yearly report and things are looking bullish. The company beat expectations with revenues of AU$145m arriving 2.9% ahead of forecasts. Statutory earnings per share (EPS) were AU$0.18, 3.0% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Deterra Royalties' seven analysts is for revenues of AU$302.4m in 2022, which would reflect a sizeable 108% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 71% to AU$0.31. Before this earnings report, the analysts had been forecasting revenues of AU$274.7m and earnings per share (EPS) of AU$0.35 in 2022. Although revenues are expected to increase meaningfully, the analysts have acknowledged the cost of growth, given the substantial drop in EPS estimates following the latest report.
There's been no major changes to the price target of AU$4.71, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' 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. There are some variant perceptions on Deterra Royalties, with the most bullish analyst valuing it at AU$5.60 and the most bearish at AU$3.60 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. It's clear from the latest estimates that Deterra Royalties' rate of growth is expected to accelerate meaningfully, with the forecast 108% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 57% over the past year. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 2.2% annually. So it's clear with the acceleration in growth, Deterra Royalties is expected to grow meaningfully faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Deterra Royalties. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider industry. The consensus price target held steady at AU$4.71, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Deterra Royalties going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Deterra Royalties that you should be aware of.
If you decide to trade Deterra Royalties, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
Valuation is complex, but we're helping make it simple.
Find out whether Deterra Royalties is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.