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Celebrations may be in order for FS Bancorp, Inc. (NASDAQ:FSBW) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. Investors have been pretty optimistic on FS Bancorp too, with the stock up 15% to US$41.95 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the upgrade, the latest consensus from FS Bancorp's three analysts is for revenues of US$102m in 2020, which would reflect a decent 11% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to shrink 7.2% to US$4.75 in the same period. Before this latest update, the analysts had been forecasting revenues of US$92m and earnings per share (EPS) of US$4.71 in 2020. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.
The consensus price target increased 6.3% to US$42.00, with an improved revenue forecast carrying the promise of a more valuable business, in time. 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 FS Bancorp at US$45.00 per share, while the most bearish prices it at US$39.00. This is a very narrow spread of estimates, implying either that FS Bancorp is an easy company to value, or - more likely - the analysts are relying heavily on some key 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. We would highlight that FS Bancorp's revenue growth is expected to slow, with forecast 11% increase next year well below the historical 18% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 0.8% next year. So it's pretty clear that, while FS Bancorp's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at FS Bancorp.
Analysts are clearly in love with FS Bancorp at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as dilutive stock issuance over the past year. You can learn more, and discover the 3 other flags we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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