Yahoo Finance Largo Resources Ltd. Just Missed EPS By 58%: Here's What Analysts Think Will Happen Next
Last week, you might have seen that Largo Resources Ltd. (TSE:LGO) released its quarterly result to the market. The early response was not positive, with shares down 3.8% to CA$1.00 in the past week. Sales came in at CA$58m, beating expectations by a remarkable 76%, while statutory earnings per share (EPS) were CA$0.01, missing estimates by an equally remarkable 58%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
View our latest analysis for Largo Resources
After the latest results, the five analysts covering Largo Resources are now predicting revenues of CA$208.0m in 2020. If met, this would reflect a substantial 35% improvement in sales compared to the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of CA$198.2m and earnings per share (EPS) of CA$0.059 in 2020. While next year's revenue estimates increased, there was also a only a minor adjustment to EPS expectations, suggesting the consensus has a bit of a mixed view of these results.
There's been no real change to the consensus price target of CA$1.61, with Largo Resources seemingly executing in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Largo Resources at CA$2.50 per share, while the most bearish prices it at CA$1.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Largo Resources' growth to accelerate, with the forecast 35% growth ranking favourably alongside historical growth of 20% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Largo Resources is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Largo Resources. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Largo Resources. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Largo Resources analysts - going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Largo Resources that you need to take into consideration.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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