Celebrations may be in order for Ambac Financial Group, Inc. (NYSE:AMBC) shareholders, with the covering analyst delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Ambac Financial Group shares have been sold down a little recently, so investors may be hoping the latest upgrade changes the market's appetite for the business. At US$7.89, the stock is 5.3% below where it was a week ago.
After the upgrade, the consensus from Ambac Financial Group's sole analyst is for revenues of US$171m in 2022, which would reflect a painful 31% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching US$3.28 per share. However, before this estimates update, the consensus had been expecting revenues of US$133m and US$4.16 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
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. One more thing stood out to us about these estimates, and it's the idea that Ambac Financial Group's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 39% to the end of 2022. This tops off a historical decline of 25% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 4.4% annually. So while a broad number of companies are forecast to grow, unfortunately Ambac Financial Group is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Ambac Financial Group is moving incrementally towards profitability. Pleasantly, the analyst also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. With a serious upgrade to expectations, it might be time to take another look at Ambac Financial Group.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2023, which can be seen for 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.