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Earnings Miss: Silver Lake Resources Limited Missed EPS By 79% And Analysts Are Revising Their Forecasts

Simply Wall St

It's been a good week for Silver Lake Resources Limited (ASX:SLR) shareholders, because the company has just released its latest interim results, and the shares gained 2.6% to AU$1.80. It looks like a pretty bad result, all things considered. Although revenues of AU$259m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 79% to hit AU$0.011 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Silver Lake Resources

ASX:SLR Past and Future Earnings, February 27th 2020

Taking into account the latest results, the latest consensus from Silver Lake Resources's five analysts is for revenues of AU$500.5m in 2020, which would reflect a notable 14% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 39% to AU$0.089. In the lead-up to this report, analysts had been modelling revenues of AU$492.3m and earnings per share (EPS) of AU$0.11 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.

Although analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 8.3% to AU$1.62, suggesting the revised estimates are not indicative of a weaker long-term future for the business. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Silver Lake Resources, with the most bullish analyst valuing it at AU$2.00 and the most bearish at AU$1.36 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Further, we can compare these estimates to past performance, and see how Silver Lake Resources forecasts compare to the wider market's forecast performance. We can infer from the latest estimates that analysts are expecting a continuation of Silver Lake Resources's historical trends, as next year's forecast 14% revenue growth is roughly in line with 13% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 0.4% per year. So it's pretty clear that Silver Lake Resources is forecast to grow substantially faster than its market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Silver Lake Resources. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Silver Lake Resources's revenues are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Silver Lake Resources going out to 2023, and you can see them free on our platform here..

You can also see our analysis of Silver Lake Resources's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.