It's been a sad week for Cronos Group Inc. (TSE:CRON), who've watched their investment drop 12% to CA$3.88 in the week since the company reported its second-quarter result. Revenues of US$23m fell short of estimates by 18%, but statutory losses were relatively mild, coming in 9.6% smaller than the analysts expected, at US$0.05 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Cronos Group from nine analysts is for revenues of US$108.5m in 2022 which, if met, would be a solid 15% increase on its sales over the past 12 months. Losses are forecast to narrow 3.2% to US$0.28 per share. Before this earnings announcement, the analysts had been modelling revenues of US$117.1m and losses of US$0.26 per share in 2022. So it's pretty clear consensus is more negative on Cronos Group after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a pronounced increase to per-share loss expectations.
The average price target was broadly unchanged at CA$6.17, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Cronos Group at CA$11.00 per share, while the most bearish prices it at CA$3.86. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Cronos Group's revenue growth is expected to slow, with the forecast 32% annualised growth rate until the end of 2022 being well below the historical 54% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 23% annually. Even after the forecast slowdown in growth, it seems obvious that Cronos Group is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Cronos Group's revenues are expected to grow faster than 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. At Simply Wall St, we have a full range of analyst estimates for Cronos Group going out to 2024, and you can see them free on our platform here..
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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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