It's been a good week for Kenmare Resources plc (LON:KMR) shareholders, because the company has just released its latest annual results, and the shares gained 3.8% to UK£1.76. It was a pretty mixed result, with revenues beating expectations to hit US$271m. Statutory earnings fell 4.2% short of analyst forecasts, reaching US$0.40 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Kenmare Resources's five analysts are now forecasting revenues of US$280.5m in 2020. This would be a modest 3.5% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 2.9% to US$0.42. In the lead-up to this report, the analysts had been modelling revenues of US$269.5m and earnings per share (EPS) of US$0.44 in 2020. So it's pretty clear consensus is mixed on Kenmare Resources after the latest results; whilethe analysts lifted revenue numbers, they also administered a small dip in per-share earnings expectations.
The consensus price target fell 7.7% to US$5.33, suggesting that the analysts are primarily focused on earnings as the driver of value for this business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Kenmare Resources analyst has a price target of US$5.79 per share, while the most pessimistic values it at US$4.94. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
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 Kenmare Resources's revenue growth is expected to slow, with forecast 3.5% increase next year well below the historical 14%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 0.4% next year. Even after the forecast slowdown in growth, it seems obvious that Kenmare Resources is also expected to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kenmare Resources. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Kenmare Resources's future valuation.
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. We have forecasts for Kenmare Resources going out to 2024, and you can see them free on our platform here.
Plus, you should also learn about the 1 warning sign we've spotted with Kenmare Resources .
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