Market forces rained on the parade of Sierra Metals Inc. (TSE:SMT) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the consensus from three analysts covering Sierra Metals is for revenues of US$224m in 2022, implying a perceptible 2.7% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 84% to US$0.052. Before this latest update, the analysts had been forecasting revenues of US$256m and earnings per share (EPS) of US$0.047 in 2022. So we can see that the consensus has become notably more bearish on Sierra Metals' outlook with these numbers, making a measurable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

Check out our latest analysis for Sierra Metals

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sierra Metals' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 5.4% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 6.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that Sierra Metals' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Sierra Metals dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the serious cut to this year's outlook, it's clear that analysts have turned more bearish on Sierra Metals, and we wouldn't blame shareholders for feeling a little more cautious themselves.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Sierra Metals' business, like the risk of cutting its dividend. Learn more, and discover the 1 other concern we've identified, 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here