Saras S.p.A. (BIT:SRS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Saras has also found favour with investors, with the stock up a worthy 21% to €1.20 over the past week. Could this upgrade be enough to drive the stock even higher?
After this upgrade, Saras' four analysts are now forecasting revenues of €10b in 2022. This would be a credible 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 163% to €0.31. Before this latest update, the analysts had been forecasting revenues of €9.3b and earnings per share (EPS) of €0.079 in 2022. 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 78% to €1.53 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Saras at €2.05 per share, while the most bearish prices it at €1.10. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Saras is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.3% annualised growth until the end of 2022. If achieved, this would be a much better result than the 3.1% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to decline 2.1% per year. So it's pretty clear that Saras is expected 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. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Saras could be worth investigating further.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Saras that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology 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.