Sixt SE (ETR:SIX2) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The stock price has risen 7.1% to €72.10 over the past week, suggesting investors are becoming more optimistic. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the latest upgrade, the seven analysts covering Sixt provided consensus estimates of €1.7b revenue in 2020, which would reflect a concerning 47% decline on its sales over the past 12 months. Statutory earnings per share are supposed to nosedive 85% to €0.76 in the same period. Yet before this consensus update, the analysts had been forecasting revenues of €1.5b and losses of €1.24 per share in 2020. So we can see that this has sparked a pretty clear upgrade to expectations, with higher revenues anticipated to lead to profit sooner than previously forecast.

Check out our latest analysis for Sixt

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of €81.44, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic Sixt analyst has a price target of €113 per share, while the most pessimistic values it at €53.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 47%, a significant reduction from annual growth of 9.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.7% next year. It's pretty clear that Sixt's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that there is now an expectation for Sixt to become profitable this year, compared to previous expectations of a loss. 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 Sixt could be a good candidate for more research.

Analysts are clearly in love with Sixt at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as its declining profit margins. You can learn more, and discover the 2 other warning signs we've identified, for 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.

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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. Thank you for reading.