West African Resources Limited Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

It's been a good week for West African Resources Limited (ASX:WAF) shareholders, because the company has just released its latest interim results, and the shares gained 3.0% to AU$0.85. It was not a great result overall. Although revenues beat expectations, hitting AU$310m, statutory earnings missed analyst forecasts by 10%, coming in at just AU$0.072 per share. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for West African Resources

Taking into account the latest results, the consensus forecast from West African Resources' four analysts is for revenues of AU$625.0m in 2023. This reflects an okay 4.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to increase 3.1% to AU$0.14. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$590.0m and earnings per share (EPS) of AU$0.14 in 2023. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$1.58, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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 West African Resources at AU$2.00 per share, while the most bearish prices it at AU$1.29. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 West African Resources' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 10% growth on an annualised basis. This is compared to a historical growth rate of 46% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.8% per year. So it's pretty clear that, while West African Resources' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around West African Resources' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster than the wider industry. The consensus price target held steady at AU$1.58, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for West African Resources going out to 2025, 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 West African Resources that you should be aware of.

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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.