Growth Investors: Industry Analysts Just Upgraded Their Bellway p.l.c. (LON:BWY) Revenue Forecasts By 15%
Celebrations may be in order for Bellway p.l.c. (LON:BWY) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investors have been pretty optimistic on Bellway too, with the stock up 34% to UK£25.48 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the latest upgrade, the 13 analysts covering Bellway provided consensus estimates of UK£3.0b revenue in 2020, which would reflect a definite 9.6% decline on its sales over the past 12 months. Statutory earnings per share are supposed to dive 27% to UK£3.10 in the same period. Before this latest update, the analysts had been forecasting revenues of UK£2.6b and earnings per share (EPS) of UK£2.97 in 2020. Sentiment certainly seems to have improved in recent times, with a solid increase in revenue and a modest lift to earnings per share estimates.
View our latest analysis for Bellway
As a result, it might be a surprise to see that the analysts have cut their price target 8.5% to UK£34.92, which could suggest the forecast improvement in performance is not expected to last. 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. Currently, the most bullish analyst values Bellway at UK£47.90 per share, while the most bearish prices it at UK£24.71. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Bellway's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 9.6% revenue decline a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Bellway is expected to lag 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. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Bellway.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Bellway that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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