Champion Iron Limited (ASX:CIA) came out with its annual results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Results look mixed - while revenue fell marginally short of analyst estimates at CA$1.5b, statutory earnings beat expectations 3.9%, with Champion Iron reporting profits of CA$1.03 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Champion Iron's twelve analysts is for revenues of CA$1.76b in 2023, which would reflect a major 20% increase on its sales over the past 12 months. Statutory earnings per share are expected to decline 10% to CA$0.91 in the same period. Before this earnings report, the analysts had been forecasting revenues of CA$1.74b and earnings per share (EPS) of CA$0.93 in 2023. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at AU$8.68, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. The most optimistic Champion Iron analyst has a price target of AU$9.05 per share, while the most pessimistic values it at AU$7.93. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Champion Iron's revenue growth is expected to slow, with the forecast 20% annualised growth rate until the end of 2023 being well below the historical 50% p.a. growth over the last five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 0.04% annually. So it's clear that despite the slowdown in growth, Champion Iron is still expected to grow meaningfully faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Champion Iron. On the plus side, they made no changes to their revenue estimates - and they expect sales to perform better than the wider industry. The consensus price target held steady at AU$8.68, with the latest estimates not enough to have an impact on their price targets.
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 forecasts for Champion Iron going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Champion Iron (at least 2 which shouldn't be ignored) , and understanding these should be part of your investment process.
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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.