Rainbows and Unicorns: CAP S.A. (SNSE:CAP) Analysts Just Became A Lot More Optimistic

CAP S.A. (SNSE:CAP) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

Following the upgrade, the current consensus from CAP's six analysts is for revenues of US$3.5b in 2021 which - if met - would reflect a substantial 32% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 276% to US$7.56. Prior to this update, the analysts had been forecasting revenues of US$3.2b and earnings per share (EPS) of US$4.48 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

View our latest analysis for CAP

It will come as no surprise to learn that the analysts have increased their price target for CAP 9.6% to US$19.45 on the back of these upgrades. 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. There are some variant perceptions on CAP, with the most bullish analyst valuing it at US$17,100 and the most bearish at US$9,475 per share. 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.

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. It's clear from the latest estimates that CAP's rate of growth is expected to accelerate meaningfully, with the forecast 45% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 5.8% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 4.9% annually. So it's clear with the acceleration in growth, CAP is expected to grow meaningfully 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. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, CAP could be worth investigating further.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on CAP that suggests the company could be somewhat 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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