Shareholders in United Electronics Company (TADAWUL:4003) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term 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. Investor sentiment seems to be improving too, with the share price up 4.9% to ر.س120 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the most recent consensus for United Electronics from its six analysts is for revenues of ر.س6.8b in 2021 which, if met, would be a solid 12% increase on its sales over the past 12 months. Per-share earnings are expected to increase 7.4% to ر.س6.09. Prior to this update, the analysts had been forecasting revenues of ر.س6.2b and earnings per share (EPS) of ر.س5.35 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of ر.س114, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic United Electronics analyst has a price target of ر.س134 per share, while the most pessimistic values it at ر.س90.80. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await United Electronics shareholders.
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 United Electronics' growth to accelerate, with the forecast 17% annualised growth to the end of 2021 ranking favourably alongside historical growth of 11% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that United Electronics 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. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at United Electronics.
Analysts are definitely bullish on United Electronics, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 2 other warning signs we've identified .
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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