Some Alamos Gold Inc. (TSE:AGI) Analysts Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of Alamos Gold Inc. (TSE:AGI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. The stock price has risen 4.7% to CA$33.07 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the current consensus from Alamos Gold's five analysts is for revenues of US$1.7b in 2025 which - if met - would reflect a major 23% increase on its sales over the past 12 months. Per-share earnings are expected to surge 79% to US$1.21. Previously, the analysts had been modelling revenues of US$1.9b and earnings per share (EPS) of US$1.54 in 2025. Indeed, we can see that the analysts are a lot more bearish about Alamos Gold's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Alamos Gold

Analysts made no major changes to their price target of US$27.62, suggesting the downgrades are not expected to have a long-term impact on Alamos Gold'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. The most optimistic Alamos Gold analyst has a price target of US$32.38 per share, while the most pessimistic values it at US$24.46. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Alamos Gold's past performance and to peers in the same industry. The analysts are definitely expecting Alamos Gold's growth to accelerate, with the forecast 23% annualised growth to the end of 2025 ranking favourably alongside historical growth of 12% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Alamos Gold 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. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Alamos Gold.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that Alamos Gold could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.

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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.