Cowen Inc. (NASDAQ:COWN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 20% to US$33.76 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
After this upgrade, Cowen's four analysts are now forecasting revenues of US$1.5b in 2021. This would be an okay 2.7% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to plummet 55% to US$3.37 in the same period. Previously, the analysts had been modelling revenues of US$1.2b and earnings per share (EPS) of US$2.93 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 30% to US$43.50 per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Cowen analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$31.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Cowen is an easy business to forecast or the underlying assumptions are obvious.
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 would highlight that Cowen's revenue growth is expected to slow, with forecast 2.7% increase next year well below the historical 25% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that Cowen is also expected to grow slower than other industry participants.
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, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Cowen.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Cowen analysts - going out to 2022, 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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