The Unite Group plc (LON:UTG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the latest upgrade, the six analysts covering Unite Group provided consensus estimates of UK£165m revenue in 2020, which would reflect a disturbing 33% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 88% to UK£0.11. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£147m and losses of UK£0.33 per share in 2020. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of UK£9.88, implying that their latest estimates don't have a long term impact on what they think the stock is worth. 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. Currently, the most bullish analyst values Unite Group at UK£10.90 per share, while the most bearish prices it at UK£7.70. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We would highlight that sales are expected to reverse, with the forecast 33% revenue decline a notable change from historical growth of 0.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.6% next year. It's pretty clear that Unite Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Unite Group's prospects. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues 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 Unite Group could be a good candidate for more research.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential warning signs with Unite Group, including 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.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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 email@example.com.