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Korn Ferry (NYSE:KFY) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next 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 seems to be pricing in some improvement in the business too, with the stock up 8.9% over the past week, closing at US$61.56. Could this big upgrade push the stock even higher?
Following the upgrade, the latest consensus from Korn Ferry's four analysts is for revenues of US$2.0b in 2022, which would reflect a decent 18% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 255% to US$3.10. Previously, the analysts had been modelling revenues of US$1.8b and earnings per share (EPS) of US$2.30 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Korn Ferry 37% to US$69.20 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Korn Ferry at US$62.00 per share, while the most bearish prices it at US$37.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. The analysts are definitely expecting Korn Ferry's growth to accelerate, with the forecast 14% annualised growth to the end of 2022 ranking favourably alongside historical growth of 6.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Korn Ferry 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 next 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. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Korn Ferry.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Korn Ferry going out to 2023, 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. 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.
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