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Shareholders in RPC, Inc. (NYSE:RES) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. RPC has also found favour with investors, with the stock up a notable 29% to US$4.93 over the past week. Could this upgrade be enough to drive the stock even higher?
After this upgrade, RPC's nine analysts are now forecasting revenues of US$687m in 2021. This would be a meaningful 15% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$620m in 2021. It looks like there's been a clear increase in optimism around RPC, given the decent improvement in revenue forecasts.
Additionally, the consensus price target for RPC increased 5.8% to US$3.20, showing a clear increase in optimism from the analysts involved. 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 RPC, with the most bullish analyst valuing it at US$5.00 and the most bearish at US$1.00 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.
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. It's clear from the latest estimates that RPC's rate of growth is expected to accelerate meaningfully, with the forecast 15% revenue growth noticeably faster than its historical growth of 0.2% 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 6.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that RPC is expected to grow much faster than its industry.
The Bottom Line
The highlight for us was that analysts increased their revenue forecasts for RPC this year. They're also forecasting more rapid revenue growth than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at RPC.
Looking for more information? At least one of RPC's nine analysts has provided estimates out to 2023, which can be seen for 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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