Analysts Just Made An Incredible Upgrade To Their Insurance Australia Group Limited (ASX:IAG) Forecasts

Insurance Australia Group Limited (ASX:IAG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 7.5% to AU$5.31 over the past 7 days. Could this big upgrade push the stock even higher?

Following the upgrade, the current consensus from Insurance Australia Group's nine analysts is for revenues of AU$8.3b in 2021 which - if met - would reflect a notable 13% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 68% to AU$0.042. Yet before this consensus update, the analysts had been forecasting revenues of AU$7.4b and losses of AU$0.082 per share in 2021. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

View our latest analysis for Insurance Australia Group

There was no major change to the consensus price target of AU$5.65, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue 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. The most optimistic Insurance Australia Group analyst has a price target of AU$6.20 per share, while the most pessimistic values it at AU$5.10. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Insurance Australia Group is an easy business to forecast or the underlying assumptions are obvious.

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. For example, we noticed that Insurance Australia Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 13%, well above its historical decline of 4.1% a year 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 1.2% per year. So it looks like Insurance Australia Group is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Insurance Australia Group's prospects. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Insurance Australia Group could be a good candidate for more research.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Insurance Australia Group going out to 2024, 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. 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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