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Shareholders in Mainfreight Limited (NZSE:MFT) 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 the analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 5.9% to NZ$82.00 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
After this upgrade, Mainfreight's four analysts are now forecasting revenues of NZ$4.4b in 2022. This would be a substantial 25% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 36% to NZ$2.54. Before this latest update, the analysts had been forecasting revenues of NZ$4.0b and earnings per share (EPS) of NZ$2.25 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Mainfreight 8.0% to NZ$85.80 on the back of these upgrades. 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 Mainfreight at NZ$89.60 per share, while the most bearish prices it at NZ$83.61. This is a very narrow spread of estimates, implying either that Mainfreight is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. It's clear from the latest estimates that Mainfreight's rate of growth is expected to accelerate meaningfully, with the forecast 25% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 9.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Mainfreight 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 upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Mainfreight.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Mainfreight going out to 2024, and you can see them 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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