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Investors in The Community Financial Corporation (NASDAQ:TCFC) had a good week, as its shares rose 4.2% to close at US$22.76 following the release of its quarterly results. Results were roughly in line with estimates, with revenues of US$17m and statutory earnings per share of US$0.64. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Community Financial's dual analysts is for revenues of US$66.6m in 2021, which would reflect a solid 19% increase on its sales over the past 12 months. Statutory earnings per share are forecast to shrink 9.9% to US$2.15 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$66.6m and earnings per share (EPS) of US$2.26 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target fell 33% to US$24.00, with the analysts clearly linking lower forecast earnings to the performance of the stock price.
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 clear from the latest estimates that Community Financial's rate of growth is expected to accelerate meaningfully, with the forecast 19% revenue growth noticeably faster than its historical growth of 9.2%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.1% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Community Financial to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Community Financial. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Community Financial's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Community Financial. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Community Financial going out as far as 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Community Financial you should know about.
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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