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Need To Know: Analysts Are Much More Bullish On Cowen Inc. (NASDAQ:COWN)

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Celebrations may be in order for Cowen Inc. (NASDAQ:COWN) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market may be pricing in some blue sky too, with the share price gaining 20% to US$33.76 in the last 7 days. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

After this upgrade, Cowen's four analysts are now forecasting revenues of US$1.5b in 2021. This would be a modest 2.7% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 55% to US$3.37 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.2b and earnings per share (EPS) of US$2.93 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for Cowen

earnings-and-revenue-growth
earnings-and-revenue-growth

It will come as no surprise to learn that the analysts have increased their price target for Cowen 30% to US$43.50 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Cowen, with the most bullish analyst valuing it at US$36.00 and the most bearish at US$31.00 per share. This is a very narrow spread of estimates, implying either that Cowen is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cowen's past performance and to peers in the same industry. We would highlight that Cowen's revenue growth is expected to slow, with forecast 2.7% increase next year well below the historical 25% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.0% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Cowen.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Cowen could be worth investigating further.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Cowen analysts - going out to 2022, and you can see them 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.