Investors in Alkane Resources Limited (ASX:ALK) had a good week, as its shares rose 4.7% to close at AU$0.68 following the release of its full-year results. Revenues of AU$191m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at AU$0.07, missing estimates by 8.3%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the three analysts covering Alkane Resources provided consensus estimates of AU$184.4m revenue in 2024, which would reflect a noticeable 3.2% decline over the past 12 months. Statutory earnings per share are expected to dip 9.7% to AU$0.064 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$182.4m and earnings per share (EPS) of AU$0.06 in 2024. So the consensus seems to have become somewhat more optimistic on Alkane Resources' earnings potential following these results.
There's been no major changes to the consensus price target of AU$1.03, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's 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. There are some variant perceptions on Alkane Resources, with the most bullish analyst valuing it at AU$1.05 and the most bearish at AU$1.00 per share. 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.
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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 3.2% by the end of 2024. This indicates a significant reduction from annual growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.3% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Alkane Resources is expected to lag the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Alkane Resources following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse 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 Alkane Resources. Long-term earnings power is much more important than next year's profits. We have forecasts for Alkane Resources going out to 2026, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Alkane Resources that you need to take into consideration.
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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.