Shareholders in Insurance Australia Group Limited (ASX:IAG) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline.

Following the upgrade, the latest consensus from Insurance Australia Group's nine analysts is for revenues of AU$7.6b in 2021, which would reflect a credible 2.7% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 50% to AU$0.066. Yet before this consensus update, the analysts had been forecasting revenues of AU$7.6b and losses of AU$0.07 per share in 2021. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers were unchanged.

See our latest analysis for Insurance Australia Group

The consensus price target held steady at AU$5.65, seeming to indicate that business is performing in line with expectations. 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 Insurance Australia Group at AU$6.20 per share, while the most bearish prices it at AU$4.85. This is a very narrow spread of estimates, implying either that Insurance Australia Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. For example, we noticed that Insurance Australia Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 5.4% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 4.1% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 3.3% annually. So it looks like Insurance Australia Group is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Insurance Australia Group is moving incrementally towards profitability. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues will come in ahead of the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Insurance Australia Group.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Insurance Australia Group analysts - going out to 2024, 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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