Vista Outdoor Inc. (NYSE:VSTO) 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 4.7% over the past week, closing at US$41.29. Could this big upgrade push the stock even higher?
Following the upgrade, the latest consensus from Vista Outdoor's eight analysts is for revenues of US$2.8b in 2022, which would reflect a notable 15% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 7.1% to US$6.03. Prior to this update, the analysts had been forecasting revenues of US$2.5b and earnings per share (EPS) of US$3.56 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 6.8% to US$53.78 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. Currently, the most bullish analyst values Vista Outdoor at US$63.00 per share, while the most bearish prices it at US$45.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Vista Outdoor's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Vista Outdoor is forecast to grow faster in the future than it has in the past, with revenues expected to display 20% annualised growth until the end of 2022. If achieved, this would be a much better result than the 5.3% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 12% annually. So it looks like Vista Outdoor is expected to grow faster than its competitors, at least for a while.
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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Vista Outdoor.
Analysts are definitely bullish on Vista Outdoor, 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 2 other warning signs we've identified, for free on our platform here.
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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