The ONE Group Hospitality, Inc. (NASDAQ:STKS) 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 10% to US$10.61 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
After this upgrade, ONE Group Hospitality's dual analysts are now forecasting revenues of US$251m in 2021. This would be a substantial 65% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting US$0.46 in per-share earnings. Prior to this update, the analysts had been forecasting revenues of US$202m and earnings per share (EPS) of US$0.15 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 16% to US$11.00 per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic ONE Group Hospitality analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$10.00. This is a very narrow spread of estimates, implying either that ONE Group Hospitality is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ONE Group Hospitality's past performance and to peers in the same industry. It's clear from the latest estimates that ONE Group Hospitality's rate of growth is expected to accelerate meaningfully, with the forecast 95% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 18% 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 22% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that ONE Group Hospitality 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. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, ONE Group Hospitality could be worth investigating further.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2022, which can be seen for 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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