Anglo American Platinum Limited (JSE:AMS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 11% to R1,983 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the latest consensus from Anglo American Platinum's seven analysts is for revenues of R202b in 2021, which would reflect a substantial 47% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 147% to R285. Before this latest update, the analysts had been forecasting revenues of R194b and earnings per share (EPS) of R227 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a great increase in earnings per share in particular.
Despite these upgrades, the analysts have not made any major changes to their price target of R1,642, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. There are some variant perceptions on Anglo American Platinum, with the most bullish analyst valuing it at R2,300 and the most bearish at R1,090 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Anglo American Platinum's rate of growth is expected to accelerate meaningfully, with the forecast 47% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 17% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.1% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Anglo American Platinum is expected to grow much faster than its 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Anglo American Platinum.
Analysts are definitely bullish on Anglo American Platinum, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 2 other flags we've identified .
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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