Shareholders in Virtu Financial, Inc. (NASDAQ:VIRT) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.

After the upgrade, the consensus from Virtu Financial's ten analysts is for revenues of US$1.8b in 2021, which would reflect a concerning 40% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to tumble 27% to US$3.89 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.5b and earnings per share (EPS) of US$2.95 in 2021. 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 Virtu Financial

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$32.18, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Virtu Financial, with the most bullish analyst valuing it at US$38.00 and the most bearish at US$26.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 annualised revenue decline of 49% by the end of 2021. This indicates a significant reduction from annual growth of 34% 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 3.1% per year. It's pretty clear that Virtu Financial'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 analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected 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 Virtu Financial could be a good candidate for more research.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential flags with Virtu Financial, including a weak balance sheet. You can learn more, and discover the 2 other flags we've identified, for free on our platform here.

You can also see our analysis of Virtu Financial's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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