New Forecasts: Here's What Analysts Think The Future Holds For Golden Agri-Resources Ltd (SGX:E5H)

Golden Agri-Resources Ltd (SGX:E5H) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. Investors have been pretty optimistic on Golden Agri-Resources too, with the stock up 12% to S$0.23 over the past week. Could this upgrade be enough to drive the stock even higher?

After the upgrade, the four analysts covering Golden Agri-Resources are now predicting revenues of US$8.3b in 2021. If met, this would reflect a meaningful 17% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 613% to US$0.018. Prior to this update, the analysts had been forecasting revenues of US$7.3b and earnings per share (EPS) of US$0.018 in 2021. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

Check out our latest analysis for Golden Agri-Resources

Even though revenue forecasts increased, there was no change to the consensus price target of US$0.21, suggesting the analysts are focused on earnings as the driver of value creation. 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. The most optimistic Golden Agri-Resources analyst has a price target of US$0.55 per share, while the most pessimistic values it at US$0.19. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Golden Agri-Resources is forecast to grow faster in the future than it has in the past, with revenues expected to display 17% annualised growth until the end of 2021. If achieved, this would be a much better result than the 0.5% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 5.6% annually. Not only are Golden Agri-Resources' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Golden Agri-Resources.

Analysts are definitely bullish on Golden Agri-Resources, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including its declining profit margins. You can learn more, and discover the 2 other risks we've identified, for free on our platform here.

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This article by Simply Wall St is general in nature. 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.
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