Shareholders in Saga plc (LON:SAGA) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company’s business prospects.
After the upgrade, the consensus from Saga’s three analysts is for revenues of UK£526m in 2021, which would reflect a painful 34% decline in sales compared to the last year of performance. Prior to the latest estimates, the analysts were forecasting revenues of UK£465m in 2021. The consensus has definitely become more optimistic, showing a nice increase in revenue forecasts.
See our latest analysis for Saga
The consensus price target fell 9.3% to UK£0.32, with the analysts clearly less optimistic about Saga’s valuation following this update. 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 Saga at UK£0.55 per share, while the most bearish prices it at UK£0.19. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn’t rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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 more thing stood out to us about these estimates, and it’s the idea that Saga’sdecline is expected to accelerate, with revenues forecast to fall 34% next year, topping off a historical decline of 3.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. So while a broad number of companies are forecast to grow, unfortunately Saga is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They’re also anticipating slower revenue growth 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 Saga.
Still got questions? At least one of Saga’s three analysts has provided estimates out to 2023, which can be seen 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.
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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