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Silvercorp Metals Inc. (TSE:SVM): Are Analysts Right About The Drop In Earnings?

Simply Wall St

After Silvercorp Metals Inc.'s (TSE:SVM) recent earnings announcement in March 2019, analyst forecasts appear to be pessimistic, with earnings expected to decline by 1.6% in the upcoming year against the past 5-year average growth rate of 54%. Presently, with latest-twelve-month earnings at US$40m, we should see this fall to US$39m by 2020. Below is a brief commentary on the longer term outlook the market has for Silvercorp Metals. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for Silvercorp Metals

Exciting times ahead?

The view from 2 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

TSX:SVM Past and Future Earnings, August 5th 2019

From the current net income level of US$40m and the final forecast of US$37m by 2022, the annual rate of growth for SVM’s earnings is 1.5%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.22 in the final year of forecast compared to the current $0.24 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 23% to 21% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Silvercorp Metals, I've compiled three fundamental aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Silvercorp Metals worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Silvercorp Metals is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Silvercorp Metals? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.