Galaxy Resources Limited (ASX:GXY) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 13% to AU$3.70 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
After this upgrade, Galaxy Resources' seven analysts are now forecasting revenues of US$112m in 2021. This would be a sizeable 102% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.0025 per share this year. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$97m and losses of US$0.0026 per share in 2021. It looks like there's been a definite improvement in business conditions, with a revenue upgrade supposed to lead to profitability sooner than previously forecast.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 29% to AU$3.35 per share. 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 Galaxy Resources analyst has a price target of AU$4.80 per share, while the most pessimistic values it at AU$1.80. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. It's clear from the latest estimates that Galaxy Resources' rate of growth is expected to accelerate meaningfully, with the forecast 102% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 21% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 1.0% per year. It seems obvious that as part of the brighter growth outlook, Galaxy Resources is expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that the consensus now expects Galaxy Resources to become profitable this year. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Galaxy Resources could be worth investigating further.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Galaxy Resources going out to 2023, and you can see them free on our platform here..
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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