Shareholders in Praemium Limited (ASX:PPS) 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. The market may be pricing in some blue sky too, with the share price gaining 18% to AU$0.71 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the current consensus from Praemium's five analysts is for revenues of AU$66m in 2021 which - if met - would reflect a substantial 31% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of AU$59m in 2021. The consensus has definitely become more optimistic, showing a solid increase in revenue forecasts.
Additionally, the consensus price target for Praemium increased 12% to AU$0.74, showing a clear increase in optimism from the analysts involved. 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 Praemium analyst has a price target of AU$0.85 per share, while the most pessimistic values it at AU$0.48. 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 Praemium shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Praemium's rate of growth is expected to accelerate meaningfully, with the forecast 31% revenue growth noticeably faster than its historical growth of 15% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Praemium 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 lifted their revenue estimates for this year. The analysts also expect revenues 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 Praemium.
Looking to learn more? At least one of Praemium's five analysts has provided estimates out to 2024, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.