Need To Know: Analysts Are Much More Bullish On Desktop S.A. (BVMF:DESK3)

Shareholders in Desktop S.A. (BVMF:DESK3) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term 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 7.6% to R$17.44 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

After this upgrade, Desktop's four analysts are now forecasting revenues of R$884m in 2022. This would be a substantial 221% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 584% to R$1.56. Prior to this update, the analysts had been forecasting revenues of R$793m and earnings per share (EPS) of R$1.40 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for Desktop

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of R$31.57, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Desktop at R$45.00 per share, while the most bearish prices it at R$13.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on 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 Desktop's past performance and to peers in the same industry. It's clear from the latest estimates that Desktop's rate of growth is expected to accelerate meaningfully, with the forecast 221% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 40% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Desktop is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better 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 Desktop could be a good candidate for more research.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential flag with Desktop, including its declining profit margins. For more information, you can click through to our platform to learn more about this and the 1 other flag we've identified .

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.