Celebrations may be in order for NexPoint Real Estate Finance, Inc. (NYSE:NREF) 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 the analysts now much more optimistic on its sales pipeline.
Following the upgrade, the most recent consensus for NexPoint Real Estate Finance from its three analysts is for revenues of US$42m in 2020 which, if met, would be a substantial increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$37m of revenue in 2020. The consensus has definitely become more optimistic, showing a nice increase in revenue forecasts.
The consensus price target fell 5.6% to US$17.00, with the analysts clearly less optimistic about NexPoint Real Estate Finance's valuation following this update. 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. There are some variant perceptions on NexPoint Real Estate Finance, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$14.00 per share. This is a very narrow spread of estimates, implying either that NexPoint Real Estate Finance is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. For example, we noticed that NexPoint Real Estate Finance's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow many times over, well above its historical decline of 90% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 47% per year. So it looks like NexPoint Real Estate Finance is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at NexPoint Real Estate Finance.
Analysts are clearly in love with NexPoint Real Estate Finance at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as the risk of cutting its dividend. For more information, you can click through to our platform to learn more about this and the 4 other risks we've identified .
We also provide an overview of the NexPoint Real Estate Finance Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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