Shareholders in CMC Markets Plc (LON:CMCX) 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. CMC Markets has also found favour with investors, with the stock up a notable 24% to UK£3.39 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 CMC Markets' four analysts is for revenues of UK£279m in 2021, which would reflect a solid 12% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to reduce 9.7% to UK£0.27 in the same period. Previously, the analysts had been modelling revenues of UK£246m and earnings per share (EPS) of UK£0.24 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 15% to UK£3.18 per share. 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. The most optimistic CMC Markets analyst has a price target of UK£3.50 per share, while the most pessimistic values it at UK£3.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CMC Markets' past performance and to peers in the same industry. It's clear from the latest estimates that CMC Markets' rate of growth is expected to accelerate meaningfully, with the forecast 12% revenue growth noticeably faster than its historical growth of 3.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.8% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that CMC Markets 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. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, CMC Markets could be worth investigating further.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple CMC Markets analysts - going out to 2023, 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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