New Forecasts: Here's What Analysts Think The Future Holds For Xaar plc (LON:XAR)

Celebrations may be in order for Xaar plc (LON:XAR) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 9.3% to UK£1.97 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the upgrade, the latest consensus from Xaar's two analysts is for revenues of UK£59m in 2021, which would reflect a solid 17% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 80% to UK£0.01. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£53m and losses of UK£0.029 per share in 2021. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

View our latest analysis for Xaar

Despite these upgrades, the analysts have not made any major changes to their price target of UK£2.65, implying that their latest estimates don't have a long term impact on what they think 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. The most optimistic Xaar analyst has a price target of UK£2.80 per share, while the most pessimistic values it at UK£2.50. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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. For example, we noticed that Xaar's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 36% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 18% a year 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 8.1% annually. So it looks like Xaar is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Xaar is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Xaar could be a good candidate for more research.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2024, which can be seen for free on our platform here.

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.