Celebrations may be in order for Service Properties Trust (NASDAQ:SVC) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investors have been pretty optimistic on Service Properties Trust too, with the stock up 10% to US$5.81 over the past week. Could this upgrade be enough to drive the stock even higher?
Following the latest upgrade, the dual analysts covering Service Properties Trust provided consensus estimates of US$1.7b revenue in 2020, which would reflect a painful 27% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$1.5b in 2020. The consensus has definitely become more optimistic, showing a nice increase in revenue forecasts.
We'd point out that there was no major changes to their price target of US$8.67, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. Currently, the most bullish analyst values Service Properties Trust at US$13.00 per share, while the most bearish prices it at US$5.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 sales are expected to reverse, with the forecast 27% revenue decline a notable change from historical growth of 5.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.1% next year. It's pretty clear that Service Properties Trust's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The highlight for us was that analysts increased their revenue forecasts for Service Properties Trust this year. They also expect company revenue to perform worse than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Service Properties Trust.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential flags with Service Properties Trust, including its declining profit margins. You can learn more, and discover the 3 other flags we've identified, 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.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.
This article by Simply Wall St is general in nature. 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. Thank you for reading.
When trading Service Properties Trust or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.