Celebrations may be in order for Iberpapel Gestión, S.A. (BME:IBG) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on Iberpapel Gestión too, with the stock up 12% to €18.60 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the upgrade, the latest consensus from Iberpapel Gestión's twin analysts is for revenues of €213m in 2021, which would reflect a huge 22% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 154% to €1.24. Prior to this update, the analysts had been forecasting revenues of €189m and earnings per share (EPS) of €1.04 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of €24.45, 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. Currently, the most bullish analyst values Iberpapel Gestión at €26.10 per share, while the most bearish prices it at €23.30. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Iberpapel Gestión's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 48% growth to the end of 2021 on an annualised basis. That is 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 2.8% per year. Not only are Iberpapel Gestión's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Iberpapel Gestión.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Iberpapel Gestión going out as far as 2023, and you can see them free on our platform here.
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