Repsol, S.A. (BME:REP) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.
Following the upgrade, the latest consensus from Repsol's 22 analysts is for revenues of €48b in 2021, which would reflect a substantial 74% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of €1.05 per share this year. Previously, the analysts had been modelling revenues of €43b and earnings per share (EPS) of €0.96 in 2021. The most recent forecasts are noticeably more optimistic, with a substantial gain in revenue estimates and a lift to earnings per share as well.
Despite these upgrades, the analysts have not made any major changes to their price target of €12.03, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Repsol analyst has a price target of €15.00 per share, while the most pessimistic values it at €9.23. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Repsol shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Repsol's growth to accelerate, with the forecast 110% annualised growth to the end of 2021 ranking favourably alongside historical growth of 3.0% 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 3.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Repsol is expected to grow much faster than its 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster 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 Repsol.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Repsol going out to 2023, and you can see them free on our platform here..
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.
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