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3i Group plc (LON:III) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view 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 12% to UK£12.96 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
After this upgrade, 3i Group's six analysts are now forecasting revenues of UK£3.2b in 2022. This would be a huge 63% improvement in sales compared to the last 12 months. Per-share earnings are expected to ascend 19% to UK£2.29. Previously, the analysts had been modelling revenues of UK£2.3b and earnings per share (EPS) of UK£1.86 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
See our latest analysis for 3i Group
Despite these upgrades, the analysts have not made any major changes to their price target of UK£14.47, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. Currently, the most bullish analyst values 3i Group at UK£15.10 per share, while the most bearish prices it at UK£13.84. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that 3i Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 63% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 5.0% a year 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 2.3% annually. Not only are 3i Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.