Revenue and earnings revisions tend to be infrequent, but they are a strong signal of confidence in the near-term performance of public companies, as investment analysts tend to be more conservative in their assumptions and only revise revenue/earnings upward when there is solid evidence for that conclusion. There are a few catalysts that could make analysts revise companies’ expected revenue or earnings growth, for example:
- Companies could start to reap the benefits of an acceleration in topline growth due to new product pipelines that begin generating incremental revenue from innovation initiatives that have been taking place in previous years;
- Certain industry tailwinds, such as increasing investments in AI infrastructure or a cyclical industry upturn/recovery, could help the company’s earnings re-accelerate in the near term; or
- A merger and acquisition (M&A) transaction may be integrated better than expected, both in terms of cost synergies and revenue synergies.
These catalysts are quite powerful. Any improvement to future topline growth could lead to a meaningful improvement in the companies’ fundamentals, which could also lead to the potential for the market to re-rate their valuation multiples. These are the formulas needed to achieve a multi-bagger in a three- to five-year time horizon.
Overall, when analysts make an upward revision on companies with positive expected earnings in the near term, it is worthwhile for investors to dig deeper into the story and identify the sustainability of each situation. Although some of these improvements are already priced into the current share price to some degree, the magnitude of potential outperformance is quite hard to predict. Great companies with strong momentum tend to surprise investors on the upside. Therefore, a better-than-expected acceleration in Earnings Per Share (EPS) can have a positive impact on a company’s share price performance over the next three to five years.
Below, we have screened for companies with the following criteria:
• Market cap larger than $100 million
• An upward revision in estimated average revenue growth over the next two years of at least 20%
• Return on Equity (ROE) of at least 12%
| Ticker | Name | Market Cap | Revenues - Est YoY % (FY1E) | Revenues - Est YoY % (FY2E) | Return On Equity % (LTM) |
| WPM | Wheaton Precious Metals Corp. | $67.7B | 67.8% | 48.4% | 13.1% |
| FNV | Franco-Nevada Corporation | $49.7B | 56.2% | 42.3% | 14.2% |
| K | Kinross Gold Corporation | $42.1B | 36.8% | 24.6% | 24.8% |
| CLS | Celestica Inc. | $34.1B | 40.3% | 39.8% | 40.5% |
| LUG | Lundin Gold Inc. | $19.5B | 54.4% | 25.1% | 55.7% |
| AGI | Alamos Gold Inc. | $19.4B | 34.9% | 54.2% | 14.3% |
| EDV | Endeavour Mining plc | $15.2B | 56.3% | 30.8% | 20.0% |
| OGC | OceanaGold Corporation | $8.8B | 43.8% | 43.5% | 20.6% |
| KNT | K92 Mining Inc. | $5.3B | 70.6% | 41.7% | 45.5% |
| ERO | Ero Copper Corp. | $3.3B | 72.0% | 53.1% | 17.3% |
| SII | Sprott Inc. | $3.1B | 29.8% | 26.5% | 14.0% |
| WDO | Wesdome Gold Mines Ltd. | $2.7B | 69.2% | 42.3% | 43.0% |
| ASM | Avino Silver & Gold Mines Ltd. | $1.6B | 37.0% | 88.9% | 14.4% |
| ORE | Orezone Gold Corporation | $1.2B | 34.4% | 148.4% | 25.9% |
| TNZ | Tenaz Energy Corp. | $1.B | 402.9% | 126.6% | 98.6% |
| RAYA | Stingray Group Inc. | $0.8B | 29.8% | 35.8% | 19.1% |
| ITR | Integra Resources Corp. | $0.7B | 707.8% | 23.3% | 15.2% |
| PRL | Propel Holdings Inc. | $0.7B | 32.4% | 25.6% | 33.6% |
| HSTR | Heliostar Metals Ltd. | $0.6B | 448.2% | 21.0% | 73.0% |
| ELVA | Electrovaya Inc. | $0.5B | 32.0% | 47.5% | 16.9% |
The criteria for the screen are quite simple. We look for companies over $100 million in market cap because these businesses generally have decent operating track records for investors to evaluate, and their trading volume is typically meaningful enough for investors to acquire a decent position in their portfolios. Secondly, we look for companies with a significant upward adjustment - at least a 20% improvement - in revenue estimates from analysts, because we think this represents a meaningful revision that could potentially offer interesting opportunities for investors. Lastly, we focus on profitable growth by screening for companies that achieve at least a 12% ROE on a trailing-twelve-month basis.
The screener came up with 20 names. A large portion of them are mining companies due to the significant tailwind from commodity prices, which means investors need to be careful and size positions accordingly. Members will recognize some of the names that we cover in our Model Portfolios and coverage lists, such as Celestica Inc. (CLS), Propel Holdings Inc. (PRL), and Electrovaya Inc. (ELVA).
Again, the companies on this list are not recommendations but rather a starting point to help investors generate potential investment ideas and strategies. Investors can view our previous screener blog here.
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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.
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