Market forces rained on the parade of Syrah Resources Limited (ASX:SYR) shareholders today, when the analysts downgraded their forecasts for this year. 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.

Following the latest downgrade, Syrah Resources' three analysts currently expect revenues in 2023 to be US$107m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 49% to US$0.02. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$127m and losses of US$0.0087 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Syrah Resources  earnings-and-revenue-growth

The consensus price target fell 7.5% to AU$1.43, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Syrah Resources at AU$2.00 per share, while the most bearish prices it at AU$1.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Syrah Resources' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Syrah Resources' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 1.2% growth on an annualised basis. This is compared to a historical growth rate of 38% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 2.3% annually. Factoring in the forecast slowdown in growth, it seems obvious that Syrah Resources is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Syrah Resources. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Syrah Resources' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Syrah Resources.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Syrah Resources analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be  reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.

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