Today is shaping up negative for Wesdome Gold Mines Ltd. (TSE:WDO) shareholders, with the analysts delivering a substantial negative revision to this year’s forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook – perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the latest consensus from Wesdome Gold Mines’ seven analysts is for revenues of CA$289m in 2022, which would reflect a modest 2.4% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$346m in 2022. It looks like forecasts have become a fair bit less optimistic on Wesdome Gold Mines, given the measurable cut to revenue estimates.
The consensus price target fell 6.2% to CA$13.73, with the analysts clearly less optimistic about Wesdome Gold Mines’ valuation following this update. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Wesdome Gold Mines at CA$17.50 per share, while the most bearish prices it at CA$9.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s pretty clear that there is an expectation that Wesdome Gold Mines’ revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 4.9% growth on an annualised basis. This is compared to a historical growth rate of 23% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that Wesdome Gold Mines is also expected to grow slower than other industry participants.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Wesdome Gold Mines this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Wesdome Gold Mines’ future valuation. Given the stark change in sentiment, we’d understand if investors became more cautious on Wesdome Gold Mines after today.
As you can see, the analysts clearly aren’t bullish, and there might be good reason for that. We’ve identified some potential issues with Wesdome Gold Mines’ financials, such as concerns around earnings quality. Learn more, and discover the 1 other concern we’ve identified, for 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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