Stock Analysis

Silvercorp Metals Inc. (TSE:SVM) Analysts Are More Bearish Than They Used To Be

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Today is shaping up negative for Silvercorp Metals Inc. (TSE:SVM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Silvercorp Metals' four analysts is for revenues of US$199m in 2024, which would reflect a measurable 4.4% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to jump 46% to US$0.17. Prior to this update, the analysts had been forecasting revenues of US$226m and earnings per share (EPS) of US$0.27 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Silvercorp Metals

TSX:SVM Earnings and Revenue Growth August 11th 2023

Analysts made no major changes to their price target of US$5.32, suggesting the downgrades are not expected to have a long-term impact on Silvercorp Metals' valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Silvercorp Metals, with the most bullish analyst valuing it at US$6.05 and the most bearish at US$4.82 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Silvercorp Metals is an easy business to forecast or the underlying assumptions are obvious.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 5.8% by the end of 2024. This indicates a significant reduction from annual growth of 6.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. It's pretty clear that Silvercorp Metals' revenues are expected to perform substantially worse than the wider 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 Silvercorp Metals. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Silvercorp Metals.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Silvercorp Metals analysts - going out to 2026, 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.

Valuation is complex, but we're helping make it simple.

Find out whether Silvercorp Metals is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.