It's been a mediocre week for Trevali Mining Corporation (TSE:TV) shareholders, with the stock dropping 13% to CA$0.20 in the week since its latest quarterly results. It was a curious result overall, with revenues coming in 16% below what the analysts had expected, at US$101m. The company broke even in terms of statutory earnings per share (EPS). Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Trevali Mining's six analysts are now forecasting revenues of US$386.6m in 2021. This would be a huge 33% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Trevali Mining forecast to report a statutory profit of US$0.03 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$389.8m and earnings per share (EPS) of US$0.037 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at CA$0.32, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. There are some variant perceptions on Trevali Mining, with the most bullish analyst valuing it at CA$0.51 and the most bearish at CA$0.20 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Trevali Mining's past performance and to peers in the same industry. It's clear from the latest estimates that Trevali Mining's rate of growth is expected to accelerate meaningfully, with the forecast 76% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 11% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.0% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Trevali Mining is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Trevali Mining. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Trevali Mining going out to 2023, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for Trevali Mining that you need to be mindful of.
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