Shareholders in GrowGeneration Corp. (NASDAQ:GRWG) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for next year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. GrowGeneration has also found favour with investors, with the stock up a notable 11% to US$25.52 over the past week. It will be interesting to see if today’s upgrade is enough to propel the stock even higher.
After this upgrade, GrowGeneration’s six analysts are now forecasting revenues of US$290m in 2021. This would be a substantial 85% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 301% to US$0.33. Previously, the analysts had been modelling revenues of US$261m and earnings per share (EPS) of US$0.33 in 2021. There’s clearly been a surge in bullishness around the company’s sales pipeline, even if there’s no real change in earnings per share forecasts.
Analysts increased their price target 8.5% to US$23.71, perhaps signalling that higher revenues are a strong leading indicator for GrowGeneration’s valuation. 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. Currently, the most bullish analyst values GrowGeneration at US$30.00 per share, while the most bearish prices it at US$20.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s clear from the latest estimates that GrowGeneration’s rate of growth is expected to accelerate meaningfully, with the forecast 85% revenue growth noticeably faster than its historical growth of 67% p.a. 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 9.6% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that GrowGeneration is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Seeing the dramatic upgrade to next year’s forecasts, it might be time to take another look at GrowGeneration.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple GrowGeneration analysts – going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.