In This Article:
Synlait Milk Limited (NZSE:SML) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. The market seems to be pricing in some improvement in the business too, with the stock up 8.4% over the past week, closing at NZ$3.48. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the latest consensus from Synlait Milk's six analysts is for revenues of NZ$1.7b in 2022, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of NZ$0.22 per share this year. Previously, the analysts had been modelling revenues of NZ$1.5b and earnings per share (EPS) of NZ$0.21 in 2022. Sentiment certainly seems to have improved in recent times, with a decent improvement in revenue and a modest lift to earnings per share estimates.
Check out our latest analysis for Synlait Milk
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of NZ$3.98, 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 Synlait Milk, with the most bullish analyst valuing it at NZ$5.35 and the most bearish at NZ$3.40 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. The analysts are definitely expecting Synlait Milk's growth to accelerate, with the forecast 25% annualised growth to the end of 2022 ranking favourably alongside historical growth of 16% per annum 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 9.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Synlait Milk is expected to grow much faster than its industry.