Gold Road Resources Limited (ASX:GOR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
Following the upgrade, the current consensus from Gold Road Resources' six analysts is for revenues of AU$317m in 2020 which - if met - would reflect a sizeable 321% increase on its sales over the past 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting AU$0.12 in per-share earnings AU$0.12. Previously, the analysts had been modelling revenues of AU$283m and earnings per share (EPS) of AU$0.051 in 2020. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of AU$1.53, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Gold Road Resources at AU$2.00 per share, while the most bearish prices it at AU$0.85. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. It's clear from the latest estimates that Gold Road Resources' rate of growth is expected to accelerate meaningfully, with the forecast 3x revenue growth noticeably faster than its historical growth of 78% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.2% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Gold Road Resources is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Gold Road Resources could be a good candidate for more research.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Gold Road Resources analysts - going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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