3i Group plc (LON:III) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The stock price has risen 9.9% to UK£16.08 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the latest consensus from 3i Group's six analysts is for revenues of UK£4.6b in 2023, which would reflect a sizeable 23% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dip 8.5% to UK£3.43 in the same period. Previously, the analysts had been modelling revenues of UK£2.8b and earnings per share (EPS) of UK£2.72 in 2023. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Check out our latest analysis for 3i Group
With these upgrades, we're not surprised to see that the analysts have lifted their price target 10% to UK£19.42 per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on 3i Group, with the most bullish analyst valuing it at UK£22.75 and the most bearish at UK£14.72 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await 3i Group shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that 3i Group's rate of growth is expected to accelerate meaningfully, with the forecast 52% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 26% 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 5.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that 3i Group is expected to grow much faster than its 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at 3i Group.
Analysts are definitely bullish on 3i Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. You can learn more, and discover the 1 other warning sign we've identified, for 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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