Stock Analysis

Growth Investors: Industry Analysts Just Upgraded Their Synlait Milk Limited (NZSE:SML) Revenue Forecasts By 11%

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Synlait Milk Limited (NZSE:SML) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 8.4% to NZ$3.48 over the past 7 days. Could this big upgrade push the stock even higher?

After this upgrade, Synlait Milk's six analysts are now forecasting revenues of NZ$1.7b in 2022. This would be a solid 12% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting NZ$0.22 in per-share earnings. Before this latest update, the analysts had been forecasting revenues of NZ$1.5b and earnings per share (EPS) of NZ$0.21 in 2022. The most recent forecasts are noticeably more optimistic, with a substantial gain in revenue estimates and a lift to earnings per share as well.

View our latest analysis for Synlait Milk

NZSE:SML Earnings and Revenue Growth April 5th 2022

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of NZ$3.98, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Synlait Milk, with the most bullish analyst valuing it at NZ$5.35 and the most bearish at NZ$3.40 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.

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 Synlait Milk's growth to accelerate, with the forecast 25% annualised growth to the end of 2022 ranking favourably alongside historical growth of 16% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.3% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Synlait Milk to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better 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 Synlait Milk.

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

We also provide an overview of the Synlait Milk Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

Valuation is complex, but we're helping make it simple.

Find out whether Synlait Milk is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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