News Flash: Analysts Just Made A Substantial Upgrade To Their The Go-Ahead Group plc (LON:GOG) Forecasts

The Go-Ahead Group plc (LON:GOG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The stock price has risen 6.5% to UK£8.42 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the latest upgrade, the current consensus, from the seven analysts covering Go-Ahead Group, is for revenues of UK£3.4b in 2022, which would reflect a chunky 16% reduction in Go-Ahead Group's sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of UK£0.92 per share this year. Prior to this update, the analysts had been forecasting revenues of UK£2.8b and earnings per share (EPS) of UK£0.92 in 2022. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.

View our latest analysis for Go-Ahead Group

It may not be a surprise to see that the analysts have reconfirmed their price target of UK£10.98, implying that the uplift in sales is not expected to greatly contribute to Go-Ahead Group's valuation in the near term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Go-Ahead Group, with the most bullish analyst valuing it at UK£14.00 and the most bearish at UK£8.45 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2022. This indicates a significant reduction from annual growth of 3.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Go-Ahead Group is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than 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 Go-Ahead Group.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Go-Ahead Group analysts - going out to 2024, and you can see them free on our platform here.

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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.