Celebrations may be in order for Merchants Bancorp (NASDAQ:MBIN) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the upgrade, the current consensus from Merchants Bancorp's twin analysts is for revenues of US$432m in 2022 which - if met - would reflect a satisfactory 2.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to be US$4.54, approximately in line with the last 12 months. Previously, the analysts had been modelling revenues of US$389m and earnings per share (EPS) of US$3.93 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for Merchants Bancorp 7.9% to US$34.00 on the back of these upgrades. 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. The most optimistic Merchants Bancorp analyst has a price target of US$37.00 per share, while the most pessimistic values it at US$31.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Merchants Bancorp's past performance and to peers in the same industry. We would highlight that Merchants Bancorp's revenue growth is expected to slow, with the forecast 5.0% annualised growth rate until the end of 2022 being well below the historical 34% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Merchants Bancorp.
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. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Merchants Bancorp could be worth investigating further.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Merchants Bancorp going out as far as 2023, 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.
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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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