Merchants Bancorp (NASDAQ:MBIN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's 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.
After the upgrade, the three analysts covering Merchants Bancorp are now predicting revenues of US$314m in 2021. If met, this would reflect a decent 8.1% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to shrink 4.8% to US$4.52 in the same period. Prior to this update, the analysts had been forecasting revenues of US$249m and earnings per share (EPS) of US$3.03 in 2021. 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 Merchants Bancorp 24% to US$29.33 on the back of these upgrades. 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 Merchants Bancorp at US$31.00 per share, while the most bearish prices it at US$27.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Merchants Bancorp's revenue growth is expected to slow, with forecast 8.1% increase next year well below the historical 27% p.a. growth over the last five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 6.7% 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 next year. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Merchants Bancorp could be worth investigating further.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Merchants Bancorp going out to 2022, and you can see them free on our platform here..
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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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