The analysts might have been a bit too bullish on Taseko Mines Limited (TSE:TKO), given that the company fell short of expectations when it released its quarterly results last week. Statutory earnings fell substantially short of expectations, with revenues of CA$62m missing forecasts by 23%. Losses exploded, with a per-share loss of CA$0.20 some 186% below prior forecasts. Following the result, the 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from six analysts covering Taseko Mines is for revenues of CA$295.8m in 2020, implying a noticeable 7.8% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 32% to CA$0.26. Before this earnings announcement, the analysts had been modelling revenues of CA$325.7m and losses of CA$0.23 per share in 2020. So it's pretty clear the analysts have mixed opinions on Taseko Mines after this update; revenues were downgraded and per-share losses expected to increase.
The average price target was broadly unchanged at CA$0.85, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Taseko Mines, with the most bullish analyst valuing it at CA$1.50 and the most bearish at CA$0.25 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 7.8% revenue decline a notable change from historical growth of 5.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.8% next year. It's pretty clear that Taseko Mines' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Taseko Mines going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Taseko Mines that you should be aware of.
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