Industry Analysts Just Made A Dazzling Upgrade To Their 3i Group plc (LON:III) Revenue Forecasts

Celebrations may be in order for 3i Group plc (LON:III) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline. The market seems to be pricing in some improvement in the business too, with the stock up 9.9% over the past week, closing at UK£16.08. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

Following the upgrade, the most recent consensus for 3i Group from its six analysts is for revenues of UK£4.6b in 2023 which, if met, would be a major 23% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to decrease 8.5% to UK£3.43 in the same period. Previously, the analysts had been modelling revenues of UK£2.8b and earnings per share (EPS) of UK£2.72 in 2023. 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.

See our latest analysis for 3i Group

It will come as no surprise to learn that the analysts have increased their price target for 3i Group 10% to UK£19.42 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on 3i Group, with the most bullish analyst valuing it at UK£22.75 and the most bearish at UK£14.72 per share. 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 3i Group shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the 3i Group's past performance and to peers in the same industry. The analysts are definitely expecting 3i Group's growth to accelerate, with the forecast 52% annualised growth to the end of 2023 ranking favourably alongside historical growth of 26% 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 5.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that 3i Group 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at 3i Group.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential warning sign with 3i Group, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 1 other warning sign 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. 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.