First Defiance Financial Corp. (NASDAQ:FDEF) Just Released Its Yearly Results And Analysts Are Updating Their Estimates
There's been a major selloff in First Defiance Financial Corp. (NASDAQ:FDEF) shares in the week since it released its annual report, with the stock down 30% to US$13.46. First Defiance Financial reported in line with analyst predictions, delivering revenues of US$158m and statutory earnings per share of US$2.48, suggesting the business is executing well and in line with its plan. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for First Defiance Financial
Taking into account the latest results, the consensus forecast from First Defiance Financial's four analysts is for revenues of US$271.4m in 2020, which would reflect a substantial 72% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plummet 29% to US$1.76 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$275.9m and earnings per share (EPS) of US$2.02 in 2020. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$32.67, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 First Defiance Financial at US$36.00 per share, while the most bearish prices it at US$29.00. 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 First Defiance Financial is an easy business to forecast or that the the analysts are all using similar 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. It's clear from the latest estimates that First Defiance Financial's rate of growth is expected to accelerate meaningfully, with the forecast 72% revenue growth noticeably faster than its historical growth of 10%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 1.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that First Defiance Financial is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 First Defiance Financial analysts - going out to 2021, and you can see them free on our platform here.
You still need to take note of risks, for example - First Defiance Financial has 2 warning signs we think you should be aware of.
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