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Investors in Algoma Central Corporation (TSE:ALC) had a good week, as its shares rose 8.1% to close at CA$11.48 following the release of its quarterly results. Algoma Central reported in line with analyst predictions, delivering revenues of CA$155m and statutory earnings per share of CA$0.63, suggesting the business is executing well and in line with its plan. 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.
Taking into account the latest results, the consensus forecast from Algoma Central's four analysts is for revenues of CA$582.1m in 2021, which would reflect an okay 3.9% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 113% to CA$1.13. Before this earnings report, the analysts had been forecasting revenues of CA$585.5m and earnings per share (EPS) of CA$1.13 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
There were no changes to revenue or earnings estimates or the price target of CA$16.00, suggesting that the company has met expectations in its recent result. 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. The most optimistic Algoma Central analyst has a price target of CA$16.50 per share, while the most pessimistic values it at CA$15.50. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Algoma Central's revenue growth is expected to slow, with forecast 3.9% increase next year well below the historical 8.9%p.a. growth over the last five years. Compare this to the 34 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 3.5% per year. Factoring in the forecast slowdown in growth, it looks like Algoma Central is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Algoma Central analysts - going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Algoma Central you should know about.
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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