Saudi Kayan Petrochemical Company (TADAWUL:2350) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 4.2% over the past week, closing at ر.س18.00. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the latest consensus from Saudi Kayan Petrochemical's six analysts is for revenues of ر.س11b in 2021, which would reflect a sizeable 37% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of ر.س1.04 per share this year. Before this latest update, the analysts had been forecasting revenues of ر.س10b and earnings per share (EPS) of ر.س0.35 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a massive increase in earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 13% to ر.س15.49 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. The most optimistic Saudi Kayan Petrochemical analyst has a price target of ر.س22.00 per share, while the most pessimistic values it at ر.س10.00. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Saudi Kayan Petrochemical's growth to accelerate, with the forecast 52% annualised growth to the end of 2021 ranking favourably alongside historical growth of 1.6% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.6% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Saudi Kayan Petrochemical is expected to grow much faster than its 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are 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, Saudi Kayan Petrochemical could be worth investigating further.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Saudi Kayan Petrochemical analysts - going out to 2024, and you can see them 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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