The analysts might have been a bit too bullish on Gevo, Inc. (NASDAQ:GEVO), given that the company fell short of expectations when it released its third-quarter results last week. Revenues missed expectations somewhat, coming in at US$4.5m, but statutory earnings fell catastrophically short, with a loss of US$0.07 some 21% larger than what the analysts had predicted. 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.
View our latest analysis for Gevo
Following the latest results, Gevo's five analysts are now forecasting revenues of US$20.5m in 2024. This would be a sizeable 53% improvement in revenue compared to the last 12 months. Losses are expected to be contained, narrowing 17% from last year to US$0.26. Before this latest report, the consensus had been expecting revenues of US$21.0m and US$0.11 per share in losses. While next year's revenue estimates dropped there was also a considerable increase to loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target was broadly unchanged at US$4.52, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. The most optimistic Gevo analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$1.50. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Gevo's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Gevo is forecast to grow faster in the future than it has in the past, with revenues expected to display 41% annualised growth until the end of 2024. If achieved, this would be a much better result than the 50% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 0.2% per year. So although Gevo is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Gevo. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Gevo going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Gevo that you need to take into consideration.
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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.