Red River Resources Limited (ASX:RVR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.
Following the upgrade, the most recent consensus for Red River Resources from its twin analysts is for revenues of AU$127m in 2021 which, if met, would be a substantial 101% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of AU$112m in 2021. The consensus has definitely become more optimistic, showing a substantial gain in revenue forecasts.
Additionally, the consensus price target for Red River Resources increased 11% to AU$0.30, showing a clear increase in optimism from the analysts involved. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Red River Resources, with the most bullish analyst valuing it at AU$0.40 and the most bearish at AU$0.20 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Red River Resources' past performance and to peers in the same industry. The analysts are definitely expecting Red River Resources' growth to accelerate, with the forecast 101% growth ranking favourably alongside historical growth of 59% 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 1.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Red River Resources to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Red River Resources.
That's a pretty serious upgrade, but shareholders might be even more pleased to know that forecasts expect Red River Resources to be able to reach break-even within the next few years. You can learn more about these forecasts, for 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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