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Shareholders in Heritage Financial Corporation (NASDAQ:HFWA) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
Following the upgrade, the latest consensus from Heritage Financial's six analysts is for revenues of US$247m in 2020, which would reflect a solid 12% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to sink 16% to US$1.44 in the same period. Before this latest update, the analysts had been forecasting revenues of US$219m and earnings per share (EPS) of US$1.21 in 2020. 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.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$21.80, suggesting that the forecast performance does not have a long term impact on the company'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 Heritage Financial at US$23.00 per share, while the most bearish prices it at US$20.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Heritage Financial is an easy business to forecast or that the underlying assumptions are knowable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Next year brings more of the same, according to the analysts, with revenue forecast to grow 12%, in line with its 10% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 2.6% next year. So although Heritage Financial is expected to maintain its revenue growth rate, it's definitely expected 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 this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Heritage Financial.
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 Heritage Financial analysts - going out to 2021, 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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