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Today is shaping up negative for Victoria Gold Corp. (TSE:VGCX) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the most recent consensus for Victoria Gold from its three analysts is for revenues of CA$391m in 2022 which, if met, would be a notable 9.8% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 30% to CA$1.21 in the same period. Previously, the analysts had been modelling revenues of CA$438m and earnings per share (EPS) of CA$1.55 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
Analysts made no major changes to their price target of CA$19.70, suggesting the downgrades are not expected to have a long-term impact on Victoria Gold's valuation. 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. Currently, the most bullish analyst values Victoria Gold at CA$23.00 per share, while the most bearish prices it at CA$12.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Victoria Gold's past performance and to peers in the same industry. We would highlight that Victoria Gold's revenue growth is expected to slow, with the forecast 9.8% annualised growth rate until the end of 2022 being well below the historical 91% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 11% annually. Factoring in the forecast slowdown in growth, it looks like Victoria Gold is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Victoria Gold.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Victoria Gold 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.