Argan, Inc. (NYSE:AGX) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The results overall were pretty good, with revenues of US$58m exceeding expectations and losses coming in at justUS$0.44 per share, some 238% below what analysts had forecast. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Following the latest results, Argan's dual analysts are now forecasting revenues of US$562.7m in 2021. This would be a major 118% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Argan forecast to report a profit of US$2.19 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$817.7m and earnings per share (EPS) of US$4.50 in 2021. It looks like analyst sentiment has declined substantially in the aftermath of these results, with a pretty serious reduction to revenue estimates and a large cut to consensus earnings per share numbers as well.
It'll come as no surprise then, to learn that analysts have cut their price target 13% to US$53.00.
In addition, we can look to Argan's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting Argan's growth to accelerate, with the forecast 118% growth ranking favourably alongside historical growth of 4.3% per annum 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 5.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Argan is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Argan's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Argan. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.