Oceana Group Limited (JSE:OCE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.
Following the upgrade, the latest consensus from Oceana Group's three analysts is for revenues of R11b in 2023, which would reflect a meaningful 14% improvement in sales compared to the last 12 months. Per-share earnings are expected to swell 12% to R9.03. Prior to this update, the analysts had been forecasting revenues of R9.5b and earnings per share (EPS) of R7.66 in 2023. 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 Oceana Group
It will come as no surprise to learn that the analysts have increased their price target for Oceana Group 8.3% to R84.54 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 Oceana Group at R90.00 per share, while the most bearish prices it at R79.08. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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. It's clear from the latest estimates that Oceana Group's rate of growth is expected to accelerate meaningfully, with the forecast 14% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 2.4% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Oceana Group 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Oceana Group.