Shareholders in Markel Corporation (NYSE:MKL) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
Following the latest upgrade, Markel's four analysts currently expect revenues in 2020 to be US$8.1b, approximately in line with the last 12 months. Following this this upgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$9.76 per share in 2020. However, before this estimates update, the consensus had been expecting revenues of US$7.1b and US$52.54 per share in losses. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$1,049, implying that their latest estimates don't have a long term impact on what they think the stock is worth. 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 Markel, with the most bullish analyst valuing it at US$1,250 and the most bearish at US$912 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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 Markel's revenue growth is expected to slow, with forecast 0.1% increase next year well below the historical 11% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that Markel is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Markel's prospects. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Markel could be a good candidate for more research.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Markel analysts - going out to 2021, 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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