Yahoo Finance Rainbows and Unicorns: Xaar plc (LON:XAR) Analysts Just Became A Lot More Optimistic
Celebrations may be in order for Xaar plc (LON:XAR) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The stock price has risen 9.3% to UK£1.97 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the latest consensus from Xaar's twin analysts is for revenues of UK£59m in 2021, which would reflect a notable 17% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 80% to UK£0.01. Yet before this consensus update, the analysts had been forecasting revenues of UK£53m and losses of UK£0.029 per share in 2021. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
See our latest analysis for Xaar
There was no major change to the consensus price target of UK£2.65, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Xaar analyst has a price target of UK£2.80 per share, while the most pessimistic values it at UK£2.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Xaar is an easy business to forecast or the underlying assumptions are obvious.
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. One thing stands out from these estimates, which is that Xaar is forecast to grow faster in the future than it has in the past, with revenues expected to display 36% annualised growth until the end of 2021. If achieved, this would be a much better result than the 18% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.1% annually. Not only are Xaar's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Xaar's prospects. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Xaar.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts 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.
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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.
