It's been a good week for Capital Bancorp, Inc. (NASDAQ:CBNK) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.7% to US$11.13. Results overall were not great, with earnings of US$0.21 per share falling drastically short of analyst expectations. Meanwhile revenues hit US$24m and were slightly better than forecasts. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Capital Bancorp from four analysts is for revenues of US$102.0m in 2020 which, if met, would be a notable 10% increase on its sales over the past 12 months. Statutory earnings per share are predicted to grow 11% to US$1.33. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$95.3m and earnings per share (EPS) of US$1.16 in 2020. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a solid gain to earnings per share in particular.
Despite these upgrades, the consensus price target fell 10% to US$13.13, perhaps signalling that the uplift in performance is not expected to last. 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. Currently, the most bullish analyst values Capital Bancorp at US$14.00 per share, while the most bearish prices it at US$12.00. 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 Capital Bancorp is an easy business to forecast or that the the analysts are all using similar assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Capital Bancorp's revenue growth is expected to slow, with forecast 10% increase next year well below the historical 27% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.8% next year. Even after the forecast slowdown in growth, it seems obvious that Capital Bancorp is also expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Capital Bancorp's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Capital Bancorp's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Capital Bancorp. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Capital Bancorp analysts - going out to 2021, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Capital Bancorp (1 shouldn't be ignored!) that we have uncovered.
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