Donegal Group Inc. (NASDAQ:DGIC.A) Just Reported And Analysts Have Been Lifting Their Price Targets

Shareholders might have noticed that Donegal Group Inc. (NASDAQ:DGIC.A) filed its first-quarter result this time last week. The early response was not positive, with shares down 5.1% to US$15.54 in the past week. It was a credible result overall, with revenues of US$198m and statutory earnings per share of US$0.35 both in line with analyst estimates, showing that Donegal Group is executing in line with expectations. Following the result, the analyst has updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analyst has changed their mind on Donegal Group after the latest results.

See our latest analysis for Donegal Group

Following last week's earnings report, Donegal Group's solitary analyst are forecasting 2021 revenues to be US$804.9m, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 35% to US$1.30 in the same period. Before this earnings report, the analyst had been forecasting revenues of US$804.9m and earnings per share (EPS) of US$1.30 in 2021. So it's pretty clear that, although the analyst has updated their estimates, there's been no major change in expectations for the business following the latest results.

The consensus price target rose 12% to US$18.50despite there being no meaningful change to earnings estimates. It could be that the analystare reflecting the predictability of Donegal Group's earnings by assigning a price premium.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Donegal Group's revenue growth is expected to slow, with the forecast 2.4% annualised growth rate until the end of 2021 being well below the historical 3.9% 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 3.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Donegal Group.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analyst holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analyst also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Donegal Group's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Donegal Group going out as far as 2022, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for Donegal Group (1 shouldn't be ignored!) that you should be aware of.

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