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Shareholders in Bank of Marin Bancorp (NASDAQ:BMRC) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Bank of Marin Bancorp will make substantially more sales than they'd previously expected.
Following the latest upgrade, Bank of Marin Bancorp's four analysts currently expect revenues in 2020 to be US$103m, approximately in line with the last 12 months. Statutory earnings per share are supposed to drop 18% to US$2.05 in the same period. Before this latest update, the analysts had been forecasting revenues of US$100m and earnings per share (EPS) of US$1.90 in 2020. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$32.75, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. The most optimistic Bank of Marin Bancorp analyst has a price target of US$39.00 per share, while the most pessimistic values it at US$30.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
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 Bank of Marin Bancorp's revenue growth is expected to slow, with forecast 0.6% increase next year well below the historical 7.5% 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 3.5% per year. Factoring in the forecast slowdown in growth, it seems obvious that Bank of Marin Bancorp is also expected to grow slower than other industry participants.
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. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Bank of Marin Bancorp.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Bank of Marin Bancorp that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.
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.
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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