K+S Aktiengesellschaft (ETR:SDF) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that K+S will make substantially more sales than they'd previously expected.
Following the upgrade, the most recent consensus for K+S from its 17 analysts is for revenues of €5.5b in 2022 which, if met, would be a huge 73% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 30% to €7.94 in the same period. Prior to this update, the analysts had been forecasting revenues of €5.0b and earnings per share (EPS) of €6.52 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.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of €28.62, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic K+S analyst has a price target of €44.50 per share, while the most pessimistic values it at €14.00. 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.
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. For example, we noticed that K+S' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 107% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 11% 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 3.4% per year. So it looks like K+S is expected to grow faster than its competitors, at least for a while.
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. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at K+S.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on K+S that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology 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.
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.