Celebrations may be in order for Tharisa plc (JSE:THA) 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. Tharisa has also found favour with investors, with the stock up an impressive 10% to R31.50 over the past week. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the latest consensus from Tharisa's three analysts is for revenues of US$760m in 2022, which would reflect a major 27% improvement in sales compared to the last 12 months. Per-share earnings are expected to step up 19% to US$0.40. Before this latest update, the analysts had been forecasting revenues of US$677m and earnings per share (EPS) of US$0.38 in 2022. The forecasts seem more optimistic now, with a nice increase in revenue and a modest lift to earnings per share estimates.
It will come as no surprise to learn that the analysts have increased their price target for Tharisa 5.3% to US$2.90 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Tharisa, with the most bullish analyst valuing it at US$45.63 and the most bearish at US$35.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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. It's clear from the latest estimates that Tharisa's rate of growth is expected to accelerate meaningfully, with the forecast 27% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 13% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 4.5% annually. So it's clear with the acceleration in growth, Tharisa is expected to grow meaningfully faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Tharisa.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Tharisa analysts - going out to 2024, and you can see them 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.