Today is shaping up negative for Galiano Gold Inc. (TSE:GAU) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the three analysts covering Galiano Gold are now predicting revenues of US$270m in 2024. If met, this would reflect a major 182% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 244% to US$0.13. Previously, the analysts had been modelling revenues of US$318m and earnings per share (EPS) of US$0.32 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Galiano Gold

Analysts made no major changes to their price target of US$2.31, suggesting the downgrades are not expected to have a long-term impact on Galiano Gold's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Galiano Gold at US$2.91 per share, while the most bearish prices it at US$1.64. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. The analysts are definitely expecting Galiano Gold's growth to accelerate, with the forecast 7x annualised growth to the end of 2024 ranking favourably alongside historical growth of 65% 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 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Galiano Gold to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Galiano Gold after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Galiano Gold analysts - going out to 2026, and you can see them 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 with high insider ownership.

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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.