Golden Ocean Group Limited (NASDAQ:GOGL) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Golden Ocean Group has also found favour with investors, with the stock up a worthy 13% to US$15.56 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the latest upgrade, the current consensus, from the five analysts covering Golden Ocean Group, is for revenues of US$952m in 2022, which would reflect a substantial 27% reduction in Golden Ocean Group's sales over the past 12 months. Statutory earnings per share are supposed to fall 13% to US$2.73 in the same period. Previously, the analysts had been modelling revenues of US$815m and earnings per share (EPS) of US$1.67 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Golden Ocean Group 16% to US$14.25 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Golden Ocean Group at US$14.00 per share, while the most bearish prices it at US$11.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Golden Ocean Group is an easy business to forecast or the underlying assumptions are obvious.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2022. This indicates a significant reduction from annual growth of 20% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 7.6% per year. The forecasts do look bearish for Golden Ocean Group, since they're expecting it to shrink faster than the 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. They also upgraded their revenue estimates, with sales apparently performing well even though revenue growth expected to decline against the wider market this year. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Golden Ocean Group.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential warning signs with Golden Ocean Group, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 3 other warning signs we've identified .
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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