Saracen Mineral Holdings Limited (ASX:SAR) came out with its half-yearly results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues of AU$410m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at AU$0.11, missing estimates by 4.5%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts 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 analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Saracen Mineral Holdings's eight analysts is for revenues of AU$1.06b in 2020, which would reflect a sizeable 56% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shoot up 55% to AU$0.22. Before this earnings report, analysts had been forecasting revenues of AU$1.06b and earnings per share (EPS) of AU$0.25 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.
The consensus price target held steady at AU$4.32, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Saracen Mineral Holdings at AU$4.70 per share, while the most bearish prices it at AU$3.75. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's clear from the latest estimates that Saracen Mineral Holdings's rate of growth is expected to accelerate meaningfully, with forecast 56% revenue growth noticeably faster than its historical growth of 22%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 1.4% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Saracen Mineral Holdings is expected to grow much faster than its market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Saracen Mineral Holdings. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Saracen Mineral Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for Saracen Mineral Holdings going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Saracen Mineral Holdings's balance sheet, and whether we think Saracen Mineral Holdings is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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