Shareholders in Flagstar Bancorp, Inc. (NYSE:FBC) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The market seems to be pricing in some improvement in the business too, with the stock up 7.8% over the past week, closing at US$31.49. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
After the upgrade, the consensus from Flagstar Bancorp's five analysts is for revenues of US$661m in 2020, which would reflect a concerning 51% decline in sales compared to the last year of performance. Per-share earnings are expected to shoot up 29% to US$6.40. Previously, the analysts had been modelling revenues of US$590m and earnings per share (EPS) of US$4.39 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for Flagstar Bancorp 9.0% to US$38.50 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Flagstar Bancorp, with the most bullish analyst valuing it at US$41.00 and the most bearish at US$35.00 per share. 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.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 51%, a significant reduction from annual growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Flagstar Bancorp is expected to lag the wider industry.
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. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Flagstar Bancorp.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Flagstar Bancorp going out to 2022, and you can see them 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.
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. 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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