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Shareholders in Danaos Corporation (NYSE:DAC) may be thrilled to learn that the covering analyst has just delivered a major upgrade to their near-term forecasts. The analyst has sharply increased their revenue numbers, with a view that Danaos will make substantially more sales than they'd previously expected. The market may be pricing in some blue sky too, with the share price gaining 30% to US$32.36 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.
Following the upgrade, the current consensus from Danaos' sole analyst is for revenues of US$557m in 2021 which - if met - would reflect a substantial 23% increase on its sales over the past 12 months. Per-share earnings are expected to surge 117% to US$13.59. Previously, the analyst had been modelling revenues of US$501m and earnings per share (EPS) of US$13.11 in 2021. The forecasts seem more optimistic now, with a substantial gain in revenue and a small lift in earnings per share estimates.
With these upgrades, we're not surprised to see that the analyst has lifted their price target 141% to US$35.00 per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Danaos, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$18.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. One thing stands out from these estimates, which is that Danaos is forecast to grow faster in the future than it has in the past, with revenues expected to grow 23%. If achieved, this would be a much better result than the 5.1% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 3.8% per year. So it looks like Danaos is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest takeaway for us from these new estimates is that the analyst upgraded their earnings per share estimates, with improved earnings power expected for next year. Fortunately, the analyst also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also a nice increase in the price target, with the analyst apparently feeling that the intrinsic value of the business is improving. Given that the analyst appears to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Danaos.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Danaos going out as far as 2021, 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.
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