Shareholders in 888 Holdings plc (LON:888) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. 888 Holdings has also found favour with investors, with the stock up a remarkable 24% to UK£2.54 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the upgrade, the latest consensus from 888 Holdings' seven analysts is for revenues of US$729m in 2020, which would reflect a decent 10% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to rise 9.1% to US$0.20. Before this latest update, the analysts had been forecasting revenues of US$621m and earnings per share (EPS) of US$0.14 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for 888 Holdings 41% to US$3.71 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on 888 Holdings, with the most bullish analyst valuing it at US$3.62 and the most bearish at US$2.06 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 888 Holdings shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting 888 Holdings' growth to accelerate, with the forecast 10% growth ranking favourably alongside historical growth of 5.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.9% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that 888 Holdings is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, 888 Holdings could be worth investigating further.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple 888 Holdings analysts - going out to 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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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