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Shareholders in Xebec Adsorption Inc. (TSE:XBC) 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 Xebec Adsorption will make substantially more sales than they'd previously expected. The stock price has risen 10.0% to CA$9.90 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the latest consensus from Xebec Adsorption's twelve analysts is for revenues of CA$158m in 2021, which would reflect a huge 147% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$131m in 2021. The consensus has definitely become more optimistic, showing a chunky increase in revenue forecasts.
The consensus price target rose 49% to CA$9.70, with the analysts clearly more optimistic about Xebec Adsorption's prospects following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Xebec Adsorption at CA$12.50 per share, while the most bearish prices it at CA$6.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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 Xebec Adsorption's rate of growth is expected to accelerate meaningfully, with the forecast 147% revenue growth noticeably faster than its historical growth of 42% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 20% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Xebec Adsorption is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for next 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. Seeing the dramatic upgrade to next year's forecasts, it might be time to take another look at Xebec Adsorption.
Analysts are definitely bullish on Xebec Adsorption, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including major dilution from new stock issuance in the past year. For more information, you can click through to our platform to learn more about this and the 1 other flag we've identified .
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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