Semiconductor Manufacturing International Corporation (HKG:981) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the upgrade, the most recent consensus for Semiconductor Manufacturing International from its 22 analysts is for revenues of US$4.9b in 2021 which, if met, would be a meaningful 19% increase on its sales over the past 12 months. Statutory earnings per share are supposed to plunge 23% to US$0.088 in the same period. Before this latest update, the analysts had been forecasting revenues of US$4.3b and earnings per share (EPS) of US$0.045 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 5.0% to US$3.22 per share. 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. Currently, the most bullish analyst values Semiconductor Manufacturing International at US$39.98 per share, while the most bearish prices it at US$14.62. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Semiconductor Manufacturing International's growth to accelerate, with the forecast 26% annualised growth to the end of 2021 ranking favourably alongside historical growth of 7.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Semiconductor Manufacturing International to grow faster than the wider 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Semiconductor Manufacturing International could be worth investigating further.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential warning sign with Semiconductor Manufacturing International, including dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 1 other warning sign we've identified .
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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