Analysts Just Slashed Their Northam Platinum Holdings Limited (JSE:NPH) EPS Numbers

Market forces rained on the parade of Northam Platinum Holdings Limited (JSE:NPH) shareholders today, when the analysts downgraded their forecasts for this year. 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.

After the downgrade, the six analysts covering Northam Platinum Holdings are now predicting revenues of R38b in 2022. If met, this would reflect a notable 8.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 9.3% to R30.21. Previously, the analysts had been modelling revenues of R42b and earnings per share (EPS) of R40.43 in 2022. Indeed, we can see that the analysts are a lot more bearish about Northam Platinum Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Northam Platinum Holdings

Despite the cuts to forecast earnings, there was no real change to the R247 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. Currently, the most bullish analyst values Northam Platinum Holdings at R305 per share, while the most bearish prices it at R190. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Northam Platinum Holdings' revenue growth is expected to slow, with the forecast 17% annualised growth rate until the end of 2022 being well below the historical 38% p.a. growth over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 4.0% per year. Factoring in the forecast slowdown in growth, it's pretty clear that Northam Platinum Holdings is still expected to grow faster than the wider industry.

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 Northam Platinum Holdings. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit 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 Northam Platinum Holdings after the downgrade.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. You can learn more about our debt analysis for free on our platform here.

You can also see our analysis of Northam Platinum Holdings' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.