Just In: One Analyst Has Become A Lot More Bullish On Rapala VMC Corporation's (HEL:RAP1V) Earnings

Rapala VMC Corporation (HEL:RAP1V) shareholders will have a reason to smile today, with the covering analyst making substantial upgrades to this year's 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. Investors have been pretty optimistic on Rapala VMC too, with the stock up 27% to €3.59 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

After the upgrade, the solo analyst covering Rapala VMC is now predicting revenues of €265m in 2020. If met, this would reflect a credible 5.3% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 95% to €0.01. Yet prior to the latest estimates, the analyst had been forecasting revenues of €239m and losses of €0.22 per share in 2020. We can see there's definitely been a change in sentiment in this update, with the analyst administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

See our latest analysis for Rapala VMC

It will come as no surprise to learn that the analyst has increased their price target for Rapala VMC 36% to €3.80 on the back of these upgrades.

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. One thing stands out from these estimates, which is that Rapala VMC is forecast to grow faster in the future than it has in the past, with revenues expected to grow 5.3%. If achieved, this would be a much better result than the 1.2% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 8.8% next year. Although Rapala VMC's revenues are expected to improve, it seems that the analyst is still bearish on the business, forecasting it to grow slower than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Rapala VMC is moving incrementally towards profitability. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Rapala VMC could be worth investigating further.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2023, which can be seen for free 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.

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