Labrador Iron Ore Royalty Corporation (TSE:LIF) just released its latest annual report and things are not looking great. Labrador Iron Ore Royalty missed analyst estimates, with revenues of CA$177m and statutory earnings per share (EPS) of CA$3.21, missing by 4.8% and 2.1% respectively. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the four analysts covering Labrador Iron Ore Royalty provided consensus estimates of CA$161.8m revenue in 2020, which would reflect an uneasy 8.7% decline on its sales over the past 12 months. Statutory earnings per share are forecast to dive 21% to CA$2.54 in the same period. Before this earnings report, analysts had been forecasting revenues of CA$165.5m and earnings per share (EPS) of CA$2.58 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The consensus has reconfirmed its price target of CA$29.57, showing that analysts don't expect weaker sales expectations next year to have a material impact on Labrador Iron Ore Royalty's market value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Labrador Iron Ore Royalty at CA$34.00 per share, while the most bearish prices it at CA$25.00. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Labrador Iron Ore Royalty's performance in recent years. We would highlight that sales are expected to reverse, with the forecast 8.7% revenue decline a notable change from historical growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 6.0% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Labrador Iron Ore Royalty to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at CA$29.57, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Labrador Iron Ore Royalty analysts - going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Labrador Iron Ore Royalty Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.