MP Materials Corp. (NYSE:MP) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year’s forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
After the upgrade, the six analysts covering MP Materials are now predicting revenues of US$272m in 2021. If met, this would reflect a huge 26% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to drop 19% to US$0.50 in the same period. Previously, the analysts had been modelling revenues of US$235m and earnings per share (EPS) of US$0.40 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$44.21, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on MP Materials, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$37.00 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that the analysts have a clear view on its prospects.
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. It’s pretty clear that there is an expectation that MP Materials’ revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 59% growth on an annualised basis. This is compared to a historical growth rate of 118% over the past year. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 0.4% annually. Factoring in the forecast slowdown in growth, it’s pretty clear that MP Materials is still expected 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, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive – assuming these forecasts are met! So MP Materials could be a good candidate for more research.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for MP Materials going out to 2023, 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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