Party Time: Brokers Just Made Major Increases To Their The RMR Group Inc. (NASDAQ:RMR) Earnings Forecasts

The RMR Group Inc. (NASDAQ:RMR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. 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.

Following the upgrade, the latest consensus from RMR Group's twin analysts is for revenues of US$924m in 2023, which would reflect a major 356% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to decrease 8.9% to US$2.41 in the same period. Before this latest update, the analysts had been forecasting revenues of US$825m and earnings per share (EPS) of US$2.06 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for RMR Group

As a result, it might be a surprise to see that the analysts have cut their price target 6.9% to US$33.50, which could suggest the forecast improvement in performance is not expected to last. 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 RMR Group analyst has a price target of US$37.00 per share, while the most pessimistic values it at US$30.00. This is a very narrow spread of estimates, implying either that RMR Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. For example, we noticed that RMR Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 20x growth to the end of 2023 on an annualised basis. That is well above its historical decline of 15% a year 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 9.1% annually. So it looks like RMR Group 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 upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The declining price target is a puzzle, but still - with a serious upgrade to this year's expectations, it might be time to take another look at RMR Group.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2025, 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.

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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.