Analysts Just Shaved Their Touchstone Exploration Inc. (TSE:TXP) Forecasts Dramatically

One thing we could say about the analysts on Touchstone Exploration Inc. (TSE:TXP) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 24% to CA$1.56 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the most recent consensus for Touchstone Exploration from its three analysts is for revenues of US$63m in 2022 which, if met, would be a major 211% increase on its sales over the past 12 months. Statutory earnings per share are presumed to soar 82% to US$0.049. Previously, the analysts had been modelling revenues of US$75m and earnings per share (EPS) of US$0.084 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Touchstone Exploration

Analysts made no major changes to their price target of CA$3.43, suggesting the downgrades are not expected to have a long-term impact on Touchstone Exploration's 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 Touchstone Exploration, with the most bullish analyst valuing it at CA$4.50 and the most bearish at CA$2.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. The analysts are definitely expecting Touchstone Exploration's growth to accelerate, with the forecast 211% annualised growth to the end of 2022 ranking favourably alongside historical growth of 0.5% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Touchstone Exploration is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Touchstone Exploration after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Touchstone Exploration analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.