Broker Revenue Forecasts For Capital Southwest Corporation (NASDAQ:CSWC) Are Surging Higher
Capital Southwest Corporation (NASDAQ:CSWC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's statutory forecasts. The revenue forecast for next year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. Investor sentiment seems to be improving too, with the share price up 5.5% to US$20.03 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the most recent consensus for Capital Southwest from its six analysts is for revenues of US$160m in 2024 which, if met, would be a sizeable 55% increase on its sales over the past 12 months. Per-share earnings are expected to jump 149% to US$2.49. Prior to this update, the analysts had been forecasting revenues of US$139m and earnings per share (EPS) of US$2.36 in 2024. Sentiment certainly seems to have improved in recent times, with a nice increase in revenue and a slight bump in earnings per share estimates.
See our latest analysis for Capital Southwest
Despite these upgrades, the analysts have not made any major changes to their price target of US$22.21, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Capital Southwest at US$24.00 per share, while the most bearish prices it at US$21.00. This is a very narrow spread of estimates, implying either that Capital Southwest is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Capital Southwest's past performance and to peers in the same industry. It's clear from the latest estimates that Capital Southwest's rate of growth is expected to accelerate meaningfully, with the forecast 42% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 19% 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 8.1% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Capital Southwest to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Capital Southwest.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential concerns with Capital Southwest, including the risk of cutting its dividend. For more information, you can click through to our platform to learn more about this and the 2 other concerns we've identified .
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.
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