Need To Know: Analysts Just Made A Substantial Cut To Their First Foundation Inc. (NASDAQ:FFWM) Estimates
The latest analyst coverage could presage a bad day for First Foundation Inc. (NASDAQ:FFWM), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, First Foundation's five analysts currently expect revenues in 2023 to be US$370m, approximately in line with the last 12 months. Statutory earnings per share are anticipated to plunge 49% to US$1.01 in the same period. Before this latest update, the analysts had been forecasting revenues of US$413m and earnings per share (EPS) of US$1.21 in 2023. Indeed, we can see that the analysts are a lot more bearish about First Foundation's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for First Foundation
Analysts made no major changes to their price target of US$18.30, suggesting the downgrades are not expected to have a long-term impact on First Foundation's 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. The most optimistic First Foundation analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$17.00. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that First Foundation's revenue growth is expected to slow, with the forecast 1.0% annualised growth rate until the end of 2023 being well below the historical 18% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.5% per year. Factoring in the forecast slowdown in growth, it seems obvious that First Foundation is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that First Foundation's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on First Foundation after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple First Foundation analysts - going out to 2024, 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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