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One thing we could say about the analysts on Americas Gold and Silver Corporation (TSE:USA) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the current consensus from Americas Gold and Silver's six analysts is for revenues of US$116m in 2022 which - if met - would reflect a substantial 196% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 99% to US$0.0068. Before this latest update, the analysts had been forecasting revenues of US$139m and earnings per share (EPS) of US$0.048 in 2022. So we can see that the consensus has become notably more bearish on Americas Gold and Silver's outlook with these numbers, making a measurable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.
There was no major change to the consensus price target of CA$1.45, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. The most optimistic Americas Gold and Silver analyst has a price target of CA$2.00 per share, while the most pessimistic values it at CA$1.20. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. For example, we noticed that Americas Gold and Silver's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 138% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 11% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.9% annually. Not only are Americas Gold and Silver's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Americas Gold and Silver to become unprofitable next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to 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 Americas Gold and Silver after the downgrade.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Americas Gold and Silver analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.