The RMR Group Inc. (NASDAQ:RMR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year’s statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company’s business prospects.
Following the upgrade, the most recent consensus for RMR Group from its five analysts is for revenues of US$781m in 2022 which, if met, would be a substantial 316% increase on its sales over the past 12 months. Statutory earnings per share are presumed to soar 80% to US$2.06. Previously, the analysts had been modelling revenues of US$694m and earnings per share (EPS) of US$1.93 in 2022. The most recent forecasts are noticeably more optimistic, with a substantial gain in revenue estimates and a lift to earnings per share as well.
Despite these upgrades, the consensus price target fell 8.0% to US$32.67, perhaps signalling that the uplift in performance is not expected to last. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on RMR Group, with the most bullish analyst valuing it at US$36.00 and the most bearish at US$30.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that RMR Group’s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 16x growth to the end of 2022 on an annualised basis. That is well above its historical decline of 13% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.5% per year. Not only are RMR Group’s revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of RMR Group’s future valuation. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at RMR Group.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple RMR Group analysts – going out to 2024, and you can see them 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.