Yahoo Finance Some Wesdome Gold Mines Ltd. (TSE:WDO) Analysts Just Made A Major Cut To Next Year's Estimates
Market forces rained on the parade of Wesdome Gold Mines Ltd. (TSE:WDO) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the seven analysts covering Wesdome Gold Mines are now predicting revenues of CA$290m in 2021. If met, this would reflect a sizeable 38% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 26% to CA$0.49. Before this latest update, the analysts had been forecasting revenues of CA$372m and earnings per share (EPS) of CA$0.85 in 2021. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
See our latest analysis for Wesdome Gold Mines
Despite the cuts to forecast earnings, there was no real change to the CA$15.84 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Wesdome Gold Mines at CA$18.00 per share, while the most bearish prices it at CA$14.40. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Wesdome Gold Mines is an easy business to forecast or the underlying assumptions are obvious.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Wesdome Gold Mines' rate of growth is expected to accelerate meaningfully, with the forecast 38% 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 industry, which are forecast to grow their revenue 7.5% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Wesdome Gold Mines is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Wesdome Gold Mines after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Wesdome Gold Mines going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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.
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