Celebrations may be in order for Builders FirstSource, Inc. (NASDAQ:BLDR) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 6.1% to US$52.30 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the most recent consensus for Builders FirstSource from its twelve analysts is for revenues of US$17b in 2021 which, if met, would be a huge 55% increase on its sales over the past 12 months. Per-share earnings are expected to step up 18% to US$4.03. Prior to this update, the analysts had been forecasting revenues of US$15b and earnings per share (EPS) of US$2.52 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.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 15% to US$64.08 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. There are some variant perceptions on Builders FirstSource, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$54.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Builders FirstSource 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. The analysts are definitely expecting Builders FirstSource's growth to accelerate, with the forecast 79% annualised growth to the end of 2021 ranking favourably alongside historical growth of 8.7% 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 5.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Builders FirstSource is expected to grow much faster than its 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. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Builders FirstSource.
Analysts are definitely bullish on Builders FirstSource, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including recent substantial insider selling. You can learn more, and discover the 1 other risk 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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