Need To Know: Analysts Just Made A Substantial Cut To Their Syrah Resources Limited (ASX:SYR) Estimates

The latest analyst coverage could presage a bad day for Syrah Resources Limited (ASX:SYR), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following this downgrade, Syrah Resources' three analysts are forecasting 2023 revenues to be US$107m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 49% to US$0.02. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$127m and losses of US$0.0087 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Syrah Resources

The consensus price target fell 7.5% to AU$1.43, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Syrah Resources at AU$2.00 per share, while the most bearish prices it at AU$1.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. It's pretty clear that there is an expectation that Syrah Resources' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 1.2% growth on an annualised basis. This is compared to a historical growth rate of 38% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.3% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Syrah Resources.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Syrah Resources. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Syrah Resources.

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 Syrah Resources going out to 2025, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.