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Celebrations may be in order for Reliance Steel & Aluminum Co. (NYSE:RS) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.
After the upgrade, the five analysts covering Reliance Steel & Aluminum are now predicting revenues of US$13b in 2021. If met, this would reflect a substantial 25% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$12b of revenue in 2021. The consensus has definitely become more optimistic, showing a solid increase in revenue forecasts.
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 Reliance Steel & Aluminum's growth to accelerate, with the forecast 57% annualised growth to the end of 2021 ranking favourably alongside historical growth of 2.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 0.3% per year. It seems obvious that as part of the brighter growth outlook, Reliance Steel & Aluminum is expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. The analysts also expect revenues to perform better than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Reliance Steel & Aluminum.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Reliance Steel & Aluminum that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.
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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