Time To Worry? Analysts Are Downgrading Their Argan, Inc. (NYSE:AGX) Outlook

One thing we could say about the analysts on Argan, Inc. (NYSE:AGX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from Argan's twin analysts is for revenues of US$584m in 2024 which - if met - would reflect a major 27% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 83% to US$2.93. Previously, the analysts had been modelling revenues of US$651m and earnings per share (EPS) of US$3.40 in 2024. Indeed, we can see that the analysts are a lot more bearish about Argan's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Argan

Despite the cuts to forecast earnings, there was no real change to the US$53.50 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Argan analyst has a price target of US$61.00 per share, while the most pessimistic values it at US$46.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Argan is an easy business to forecast or the underlying assumptions are obvious.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Argan's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Argan is forecast to grow faster in the future than it has in the past, with revenues expected to display 21% annualised growth until the end of 2024. If achieved, this would be a much better result than the 13% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.6% per year. So it looks like Argan is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Argan. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Argan after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Argan going out as far as 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.