Shareholders in The ONE Group Hospitality, Inc. (NASDAQ:STKS) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on ONE Group Hospitality too, with the stock up 10% to US$10.61 over the past week. Could this upgrade be enough to drive the stock even higher?
After the upgrade, the twin analysts covering ONE Group Hospitality are now predicting revenues of US$251m in 2021. If met, this would reflect 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.NasdaqCM:STKS Earnings and Revenue Growth May 16th 2021
It will come as no surprise to learn that the analysts have increased their price target for ONE Group Hospitality 16% to US$11.00 on the back of these upgrades. 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 ONE Group Hospitality analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$10.00. 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. The analysts are definitely expecting ONE Group Hospitality's growth to accelerate, with the forecast 95% annualised growth to the end of 2021 ranking favourably alongside historical growth of 18% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ONE Group Hospitality 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. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at ONE Group Hospitality.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for ONE Group Hospitality going out as far as 2022, 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.
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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