Celebrations may be in order for Driven Brands Holdings Inc. (NASDAQ:DRVN) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline.
Following the upgrade, the latest consensus from Driven Brands Holdings' seven analysts is for revenues of US$1.9b in 2022, which would reflect a substantial 39% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 331% to US$1.03. Before this latest update, the analysts had been forecasting revenues of US$1.6b and earnings per share (EPS) of US$0.94 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.
Despite these upgrades, the analysts have not made any major changes to their price target of US$42.50, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. Currently, the most bullish analyst values Driven Brands Holdings at US$56.00 per share, while the most bearish prices it at US$30.00. 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.
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. We can infer from the latest estimates that forecasts expect a continuation of Driven Brands Holdings'historical trends, as the 39% annualised revenue growth to the end of 2022 is roughly in line with the 37% annual revenue growth over the past three years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 7.7% annually. So it's pretty clear that Driven Brands Holdings is forecast to grow substantially 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 analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Driven Brands Holdings.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Driven Brands Holdings that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology 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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Driven Brands Holdings
Driven Brands Holdings Inc., together with its subsidiaries, provides automotive services to retail and commercial customers in the United States, Canada, and internationally.
Very undervalued with reasonable growth potential.