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NexPoint Real Estate Finance, Inc. (NYSE:NREF) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that NexPoint Real Estate Finance will make substantially more sales than they'd previously expected.
Following the upgrade, the most recent consensus for NexPoint Real Estate Finance from its three analysts is for revenues of US$42m in 2020 which, if met, would be a huge increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$37m of revenue in 2020. It looks like there's been a clear increase in optimism around NexPoint Real Estate Finance, given the solid increase in revenue forecasts.
Notably, the analysts have cut their price target 5.6% to US$17.00, suggesting concerns around NexPoint Real Estate Finance's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic NexPoint Real Estate Finance analyst has a price target of US$19.00 per share, while the most pessimistic values it at US$14.00. This is a very narrow spread of estimates, implying either that NexPoint Real Estate Finance is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. For example, we noticed that NexPoint Real Estate Finance's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow manyfold, well above its historical decline of 90% a year over the past year. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 47% next year. Not only are NexPoint Real Estate Finance's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The highlight for us was that analysts increased their revenue forecasts for NexPoint Real Estate Finance this year. They're also forecasting more rapid revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of NexPoint Real Estate Finance's future valuation. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at NexPoint Real Estate Finance.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 6 potential concerns with NexPoint Real Estate Finance, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 4 other concerns we've identified .
We also provide an overview of the NexPoint Real Estate Finance Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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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. Thank you for reading.