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Last week, you might have seen that Gem Diamonds Limited (LON:GEMD) released its full-year result to the market. The early response was not positive, with shares down 7.6% to UK£0.27 in the past week. It looks like a credible result overall - although revenues of US$189m were what the analysts expected, Gem Diamonds surprised by delivering a (statutory) profit of US$0.072 per share, an impressive 30% above what was forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
View our latest analysis for Gem Diamonds
Taking into account the latest results, the current consensus, from the dual analysts covering Gem Diamonds, is for revenues of US$182.2m in 2023, which would reflect a noticeable 3.6% reduction in Gem Diamonds' sales over the past 12 months. Per-share earnings are expected to jump 105% to US$0.15. Before this earnings report, the analysts had been forecasting revenues of US$188.9m and earnings per share (EPS) of US$0.12 in 2023. While revenue forecasts have been revised downwards, the analysts look to have become more optimistic on the company's cost base, given the great increase in to the earnings per share numbers.
There's been no real change to the average price target of UK£0.57, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 5.7% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to decline 0.5% annually. While this is interesting, Gem Diamonds', revenues are still expected to shrink next year, and at a faster rate than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Gem Diamonds' earnings potential next year. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Gem Diamonds is still expected to perform worse than the wider industry. Still, earnings are more important to the intrinsic value of the business. 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.