Need To Know: Analysts Just Made A Substantial Cut To Their Galiano Gold Inc. (TSE:GAU) Estimates

One thing we could say about the analysts on Galiano Gold Inc. (TSE:GAU) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the three analysts covering Galiano Gold are now predicting revenues of US$270m in 2024. If met, this would reflect a major 182% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 244% to US$0.13. Previously, the analysts had been modelling revenues of US$318m and earnings per share (EPS) of US$0.32 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Galiano Gold

Analysts made no major changes to their price target of US$2.31, suggesting the downgrades are not expected to have a long-term impact on Galiano 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 Galiano Gold analyst has a price target of US$2.91 per share, while the most pessimistic values it at US$1.64. This shows there is still some 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Galiano Gold's growth to accelerate, with the forecast 7x annualised growth to the end of 2024 ranking favourably alongside historical growth of 65% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Galiano Gold is expected to grow much faster than its industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Galiano Gold. 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 Galiano Gold after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Galiano Gold going out to 2026, and you can see them 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.