Analysts Are Betting On Bega Cheese Limited (ASX:BGA) With A Big Upgrade This Week

Bega Cheese Limited (ASX:BGA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that Bega Cheese will make substantially more sales than they'd previously expected. The market seems to be pricing in some improvement in the business too, with the stock up 5.6% over the past week, closing at AU$6.20. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

After this upgrade, Bega Cheese's seven analysts are now forecasting revenues of AU$1.8b in 2021. This would be a sizeable 24% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 27% to AU$0.20. Before this latest update, the analysts had been forecasting revenues of AU$1.5b and earnings per share (EPS) of AU$0.22 in 2021. While revenue forecasts have increased, the analysts if anything seem a little more pessimistic, given the minor downgrade to earnings per share estimates in this update.

Check out our latest analysis for Bega Cheese

The consensus price target was unchanged at AU$6.14, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. 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 Bega Cheese at AU$6.80 per share, while the most bearish prices it at AU$4.80. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Bega Cheese's growth to accelerate, with the forecast 24% annualised growth to the end of 2021 ranking favourably alongside historical growth of 5.8% 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 6.6% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Bega Cheese to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Bega Cheese. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Bega Cheese.

Better yet, our automated discounted cash flow calculation (DCF) suggests Bega Cheese could be moderately undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

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. 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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