Forecast: Analysts Think 3i Group plc's (LON:III) Business Prospects Have Improved Drastically

3i Group plc (LON:III) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on 3i Group too, with the stock up 12% to UK£12.96 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

After this upgrade, 3i Group's six analysts are now forecasting revenues of UK£3.2b in 2022. This would be a sizeable 63% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to swell 19% to UK£2.29. Before this latest update, the analysts had been forecasting revenues of UK£2.3b and earnings per share (EPS) of UK£1.86 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.

Check out our latest analysis for 3i Group

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£14.47, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic 3i Group analyst has a price target of UK£15.10 per share, while the most pessimistic values it at UK£13.84. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting 3i Group is an easy business to forecast or the underlying assumptions are obvious.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that 3i Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 63% annualised growth until the end of 2022. If achieved, this would be a much better result than the 5.0% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 2.3% annually. Not only are 3i Group'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 3i Group.

Analysts are definitely bullish on 3i Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 1 other risk we've identified .

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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This article by Simply Wall St is general in nature. 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.
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