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What You Need To Know About The Sierra Rutile Holdings Limited (ASX:SRX) Analyst Downgrade Today

One thing we could say about the analysts on Sierra Rutile Holdings Limited (ASX:SRX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from twin analysts covering Sierra Rutile Holdings is for revenues of US$185m in 2023, implying a concerning 23% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 38% to US$0.031 in the same period. Previously, the analysts had been modelling revenues of US$222m and earnings per share (EPS) of US$0.031 in 2023. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

View our latest analysis for Sierra Rutile Holdings

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earnings-and-revenue-growth

The average price target was steady at US$0.41 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Sierra Rutile Holdings analyst has a price target of US$0.50 per share, while the most pessimistic values it at US$0.32. 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.

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One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 23% by the end of 2023. This indicates a significant reduction from annual growth of 9.5% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sierra Rutile Holdings is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sierra Rutile Holdings' revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Sierra Rutile Holdings after today.

There might be good reason for analyst bearishness towards Sierra Rutile Holdings, like its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.