Merchants Bancorp (NASDAQ:MBIN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market may be pricing in some blue sky too, with the share price gaining 14% to US$15.35 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the upgrade, the most recent consensus for Merchants Bancorp from its three analysts is for revenues of US$220m in 2020 which, if met, would be a meaningful 14% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to descend 13% to US$2.41 in the same period. Previously, the analysts had been modelling revenues of US$179m and earnings per share (EPS) of US$2.01 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
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. It's pretty clear that there is an expectation that Merchants Bancorp's revenue growth will slow down substantially, with revenues next year expected to grow 14%, compared to a historical growth rate of 21% over the past three years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 0.02% next year. Factoring in the forecast slowdown in growth, it's pretty clear that Merchants Bancorp is still expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations, it might be time to take another look at Merchants 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 Merchants Bancorp going out to 2021, and you can see them free on our platform here..
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