Capital Bancorp, Inc. (NASDAQ:CBNK) just released its latest second-quarter results and things are looking bullish. Revenue and earnings both exceeded expectations, with revenues of US$32m beating expectations by 22% and statutory earnings per share (EPS) of US$0.34 exceeding forecasts by 15%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Capital Bancorp's four analysts is for revenues of US$106.6m in 2020, which would reflect a modest 6.9% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shrink 6.0% to US$1.18 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$106.6m and earnings per share (EPS) of US$1.24 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$12.75, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Capital Bancorp analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$12.00. This is a very narrow spread of estimates, implying either that Capital Bancorp is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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 Capital Bancorp's revenue growth is expected to slow, with forecast 6.9% increase next year well below the historical 30% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.0% next year. So it's pretty clear that, while Capital Bancorp's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Capital Bancorp going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Capital Bancorp (1 is potentially serious!) that you need to be mindful of.
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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