Celebrations may be in order for Stride Stapled Group (NZSE:SPG) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that Stride Stapled Group will make substantially more sales than they'd previously expected.
Following the latest upgrade, the five analysts covering Stride Stapled Group provided consensus estimates of NZ$44m revenue in 2021, which would reflect a concerning 63% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of NZ$34m in 2021. The consensus has definitely become more optimistic, showing a sizeable gain to revenue forecasts.
The consensus price target rose 8.3% to NZ$2.39, with the analysts clearly more optimistic about Stride Stapled Group's prospects following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Stride Stapled Group analyst has a price target of NZ$2.50 per share, while the most pessimistic values it at NZ$2.25. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Stride Stapled Group is an easy business to forecast or the underlying assumptions are obvious.
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. We would highlight that sales are expected to reverse, with the forecast 63% revenue decline a notable change from historical growth of 9.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Stride Stapled Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Stride Stapled Group.
Analysts are definitely bullish on Stride Stapled Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including its declining profit margins. You can learn more, and discover the 2 other risks we've identified, 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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