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Moelis & Company (NYSE:MC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Moelis has also found favour with investors, with the stock up an impressive 11% to US$58.95 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following this upgrade, Moelis' nine analysts are forecasting 2021 revenues to be US$1.2b, approximately in line with the last 12 months. Statutory earnings per share are supposed to decline 18% to US$4.10 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$3.56 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$64.14, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic Moelis analyst has a price target of US$68.00 per share, while the most pessimistic values it at US$59.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Moelis' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 3.5% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 10% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Moelis is expected to lag the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Moelis could be a good candidate for more research.
Analysts are clearly in love with Moelis at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as dilutive stock issuance over the past year. You can learn more, and discover the 2 other warning signs 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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