Celebrations may be in order for Golden Ocean Group Limited (NASDAQ:GOGL) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Golden Ocean Group has also found favour with investors, with the stock up an impressive 13% to US$15.56 over the past week. Could this upgrade be enough to drive the stock even higher?
Following the latest upgrade, the current consensus, from the five analysts covering Golden Ocean Group, is for revenues of US$952m in 2022, which would reflect a concerning 27% reduction in Golden Ocean Group's sales over the past 12 months. Statutory earnings per share are anticipated to descend 13% to US$2.73 in the same period. Before this latest update, the analysts had been forecasting revenues of US$815m and earnings per share (EPS) of US$1.67 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 16% to US$14.25 per share. 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. Currently, the most bullish analyst values Golden Ocean Group at US$14.00 per share, while the most bearish prices it at US$11.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2022. This indicates a significant reduction from annual growth of 20% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 7.6% per year. The forecasts do look bearish for Golden Ocean Group, since they're expecting it to shrink faster than the industry.
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. They also upgraded their revenue estimates, with sales apparently performing well even though revenue growth expected to decline against the wider market this year. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Golden Ocean Group.
Analysts are definitely bullish on Golden Ocean Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a weak balance sheet. You can learn more, and discover the 3 other risks we've identified, for free on our platform here.
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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.