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Results: Petra Diamonds Limited Confounded Analyst Expectations With A Surprise Profit

Simply Wall St
·4 min read

Investors in Petra Diamonds Limited (LON:PDL) had a good week, as its shares rose 5.9% to close at UK£0.018 following the release of its interim results. Although revenues of US$178m were in line with analyst expectations, Petra Diamonds surprised on the earnings front, with an unexpected (statutory) profit of US$0.063 per share a nice improvement on the losses that the analystsforecast. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Petra Diamonds

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earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Petra Diamonds' six analysts is for revenues of US$410.0m in 2021, which would reflect a huge 46% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 73% to US$0.04. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$410.0m and losses of US$0.04 per share in 2021.

The average price target fell 6.0% to US$0.048, with the ongoing losses seemingly a concern for the analysts, despite the lack of real change to the earnings forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Petra Diamonds, with the most bullish analyst valuing it at US$0.098 and the most bearish at US$0.0093 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Petra Diamonds' past performance and to peers in the same industry. One thing stands out from these estimates, which is that Petra Diamonds is forecast to grow faster in the future than it has in the past, with revenues expected to grow 46%. If achieved, this would be a much better result than the 3.8% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 2.7% next year. So it looks like Petra Diamonds is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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 estimates - from multiple Petra Diamonds analysts - going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Petra Diamonds that you need to be mindful 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.