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Celebrations may be in order for GMS Inc. (NYSE:GMS) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market seems to be pricing in some improvement in the business too, with the stock up 6.8% over the past week, closing at US$60.22. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the latest consensus from GMS' six analysts is for revenues of US$4.5b in 2022, which would reflect a notable 17% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 43% to US$6.17. Previously, the analysts had been modelling revenues of US$4.1b and earnings per share (EPS) of US$4.56 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for GMS 12% to US$67.83 on the back of these upgrades. 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. Currently, the most bullish analyst values GMS at US$73.00 per share, while the most bearish prices it at US$61.00. 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.
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 GMS' rate of growth is expected to accelerate meaningfully, with the forecast 36% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 10.0% p.a. 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 8.0% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that GMS is expected to grow much faster than its 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, GMS could be worth investigating further.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential warning signs with GMS, including recent substantial insider selling. For more information, you can click through to our platform to learn more about this and the 2 other warning signs 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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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.