- Oops!Something went wrong.Please try again later.
Shareholders in GrowGeneration Corp. (NASDAQ:GRWG) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term 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 upgrade, the current consensus from GrowGeneration's seven analysts is for revenues of US$428m in 2021 which - if met - would reflect a huge 121% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 296% to US$0.48. Before this latest update, the analysts had been forecasting revenues of US$355m and earnings per share (EPS) of US$0.43 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$61.50, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic GrowGeneration analyst has a price target of US$77.00 per share, while the most pessimistic values it at US$45.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that GrowGeneration's rate of growth is expected to accelerate meaningfully, with the forecast 121% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 66% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect GrowGeneration to grow faster than 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better 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 GrowGeneration 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 2 potential concern with GrowGeneration, 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 concern 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.