Analysts Just Slashed Their Largo SA (EPA:ALLGO) EPS Numbers

Today is shaping up negative for Largo SA (EPA:ALLGO) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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 two analysts covering Largo are now predicting revenues of €21m in 2023. If met, this would reflect a reasonable 3.0% improvement in sales compared to the last 12 months. Losses are forecast to narrow 2.9% to €1.42 per share. Yet before this consensus update, the analysts had been forecasting revenues of €23m and losses of €1.16 per share in 2023. So it's pretty clear the analysts have mixed opinions on Largo after this update; revenues were downgraded and per-share losses expected to increase.

Check out our latest analysis for Largo

There was no major change to the consensus price target of €4.55, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Largo's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Largo is forecast to grow faster in the future than it has in the past, with revenues expected to display 3.0% annualised growth until the end of 2023. If achieved, this would be a much better result than the 0.6% annual decline over the past year. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.8% annually. So it looks like Largo is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Largo.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2025, which can be seen for 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.