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Shareholders in CAE Inc. (TSE:CAE) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that CAE will make substantially more sales than they'd previously expected.
Following the upgrade, the current consensus from CAE's eight analysts is for revenues of CA$3.8b in 2022 which - if met - would reflect a sizeable 23% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$3.4b in 2022. It looks like there's been a clear increase in optimism around CAE, given the nice increase in revenue forecasts.
The consensus price target rose 15% to CA$42.00, with the analysts clearly more optimistic about CAE's prospects following this update. 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 CAE analyst has a price target of CA$45.00 per share, while the most pessimistic values it at CA$38.00. This is a very narrow spread of estimates, implying either that CAE is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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 CAE's growth to accelerate, with the forecast 18% annualised growth to the end of 2022 ranking favourably alongside historical growth of 7.0% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% annually. CAE is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The highlight for us was that analysts increased their revenue forecasts for CAE next year. They're also forecasting for revenues to grow at about the same rate as companies in 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 CAE.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential concerns with CAE, including dilutive stock issuance over the past year. You can learn more, and discover the 3 other concerns we've identified, 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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