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Shareholders might have noticed that IGO Limited (ASX:IGO) filed its interim result this time last week. The early response was not positive, with shares down 8.9% to AU$6.42 in the past week. It was a workmanlike result, with revenues of AU$462m coming in 5.8% ahead of expectations, and statutory earnings per share of AU$0.26, in line with analyst appraisals. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following last week's earnings report, IGO's eleven analysts are forecasting 2021 revenues to be AU$880.4m, approximately in line with the last 12 months. Statutory earnings per share are expected to sink 18% to AU$0.15 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$865.7m and earnings per share (EPS) of AU$0.22 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at AU$6.02, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic IGO analyst has a price target of AU$7.60 per share, while the most pessimistic values it at AU$4.30. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 pretty clear that there is an expectation that IGO's revenue growth will slow down substantially, with revenues next year expected to grow 0.4%, compared to a historical growth rate of 19% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 1.5% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than IGO.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at AU$6.02, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for IGO 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 IGO that you should be aware of.
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. 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.
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