Stock Analysis

Results: Gem Diamonds Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

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Last week saw the newest full-year earnings release from Gem Diamonds Limited (LON:GEMD), an important milestone in the company's journey to build a stronger business. Revenues were US$202m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.10, an impressive 171% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Gem Diamonds

LSE:GEMD Earnings and Revenue Growth March 21st 2022

Taking into account the latest results, the current consensus from Gem Diamonds' four analysts is for revenues of US$216.6m in 2022, which would reflect an okay 7.3% increase on its sales over the past 12 months. Per-share earnings are expected to grow 17% to US$0.15. Before this earnings report, the analysts had been forecasting revenues of US$215.3m and earnings per share (EPS) of US$0.13 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.

The consensus price target was unchanged at UK£0.84, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Gem Diamonds analyst has a price target of UK£0.99 per share, while the most pessimistic values it at UK£0.72. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Gem Diamonds is an easy business to forecast or the the analysts are all using similar assumptions.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Gem Diamonds' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 7.3% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 1.7% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 4.1% per year. So although Gem Diamonds is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Gem Diamonds following these results. On the plus side, they made no changes to their revenue estimates - and they expect sales to perform better 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Gem Diamonds analysts - going out to 2024, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Gem Diamonds .

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