GrainCorp Limited (ASX:GNC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
Following the upgrade, the most recent consensus for GrainCorp from its eleven analysts is for revenues of AU$6.6b in 2022 which, if met, would be a huge 21% increase on its sales over the past 12 months. Per-share earnings are expected to soar 156% to AU$1.56. Prior to this update, the analysts had been forecasting revenues of AU$5.8b and earnings per share (EPS) of AU$1.16 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 14% to AU$8.89 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic GrainCorp analyst has a price target of AU$10.70 per share, while the most pessimistic values it at AU$6.50. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await GrainCorp shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that GrainCorp is forecast to grow faster in the future than it has in the past, with revenues expected to display 21% annualised growth until the end of 2022. If achieved, this would be a much better result than the 0.4% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 3.3% per year. Not only are GrainCorp's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, GrainCorp could be worth investigating further.
Analysts are definitely bullish on GrainCorp, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 2 other concerns we've identified .
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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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.