It's been a good week for Dundee Precious Metals Inc. (TSE:DPM) shareholders, because the company has just released its latest second-quarter results, and the shares gained 5.0% to CA$7.55. It was a workmanlike result, with revenues of US$175m coming in 3.1% ahead of expectations, and statutory earnings per share of US$1.08, in line with analyst appraisals. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Dundee Precious Metals' five analysts is for revenues of US$694.9m in 2021, which would reflect a meaningful 13% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 17% to US$0.89 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$686.0m and earnings per share (EPS) of US$1.14 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at CA$12.80, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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 Dundee Precious Metals at CA$14.41 per share, while the most bearish prices it at CA$11.17. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Dundee Precious Metals' growth to accelerate, with the forecast 27% annualised growth to the end of 2021 ranking favourably alongside historical growth of 18% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Dundee Precious Metals 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 Dundee Precious Metals. Happily, there were no major changes to revenue forecasts, with the business still 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. We have estimates – from multiple Dundee Precious Metals analysts – going out to 2023, and you can see them free on our platform here.
You still need to take note of risks, for example – Dundee Precious Metals has 3 warning signs we think you should be aware of.
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. 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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