In This Article:
M/I Homes, Inc. (NYSE:MHO) shareholders will have a reason to smile today, with the covering analyst making substantial upgrades to this year's statutory forecasts. The analyst greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 9.1% over the past week, closing at US$99.53. Could this big upgrade push the stock even higher?
Following the latest upgrade, M/I Homes' solitary analyst currently expects revenues in 2023 to be US$4.3b, approximately in line with the last 12 months. Statutory earnings per share are supposed to reduce 2.8% to US$16.88 in the same period. Prior to this update, the analyst had been forecasting revenues of US$3.7b and earnings per share (EPS) of US$12.58 in 2023. 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.
Check out our latest analysis for M/I Homes
Although the analyst has upgraded their earnings estimates, there was no change to the consensus price target of US$93.50, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values M/I Homes at US$116 per share, while the most bearish prices it at US$71.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await M/I Homes shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that M/I Homes' revenue growth is expected to slow, with the forecast 0.4% annualised growth rate until the end of 2023 being well below the historical 15% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 2.2% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than M/I Homes.
The Bottom Line
The most important thing to take away from this upgrade is that the analyst upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So M/I Homes could be a good candidate for more research.