Need To Know: The Consensus Just Cut Its Shanta Gold Limited (LON:SHG) Estimates For 2021

Market forces rained on the parade of Shanta Gold Limited (LON:SHG) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the consensus from Shanta Gold's twin analysts is for revenues of US$121m in 2021, which would reflect a not inconsiderable 18% decline in sales compared to the last year of performance. Prior to the latest estimates, the analysts were forecasting revenues of US$139m in 2021. The consensus view seems to have become more pessimistic on Shanta Gold, noting the measurable cut to revenue estimates in this update.

View our latest analysis for Shanta Gold

Notably, the analysts have cut their price target 8.8% to US$0.45, suggesting concerns around Shanta Gold's 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 Shanta Gold, with the most bullish analyst valuing it at US$0.35 and the most bearish at US$0.30 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 18% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 5.0% 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 1.4% per year. It's pretty clear that Shanta Gold's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Shanta Gold's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Shanta Gold after today.

Unanswered questions? We have estimates for Shanta Gold from its twin analysts out until 2023, and you can see them free on our platform here.

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