Analysts Are Betting On Softcat plc (LON:SCT) With A Big Upgrade This Week

Celebrations may be in order for Softcat plc (LON:SCT) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.

After this upgrade, Softcat's seven analysts are now forecasting revenues of UK£1.4b in 2022. This would be a satisfactory 5.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 2.2% to UK£0.52. Before this latest update, the analysts had been forecasting revenues of UK£1.2b and earnings per share (EPS) of UK£0.49 in 2022. The most recent forecasts are noticeably more optimistic, with a solid increase in revenue estimates and a lift to earnings per share as well.

View our latest analysis for Softcat

Despite these upgrades, the analysts have not made any major changes to their price target of UK£19.04, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Softcat, with the most bullish analyst valuing it at UK£23.50 and the most bearish at UK£14.00 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 Softcat 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 period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 10% growth on an annualised basis. That is in line with its 11% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 12% per year. It's clear that while Softcat's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

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. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 Softcat.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Softcat going out to 2024, and you can see them 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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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.