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. Investor sentiment seems to be improving too, with the share price up 7.0% to US$18.43 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the most recent consensus for Merchants Bancorp from its three analysts is for revenues of US$287m in 2020 which, if met, would be a huge 24% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 20% to US$4.27. Before this latest update, the analysts had been forecasting revenues of US$213m and earnings per share (EPS) of US$2.00 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 Merchants Bancorp 8.5% to US$21.33 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$25.00 per share, while the most bearish prices it at US$18.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Merchants Bancorp's past performance and to peers in the same industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 24%, in line with its 24% annual growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 1.4% per year. So although Merchants Bancorp is expected to maintain its revenue growth rate, it's definitely 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, analysts 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 and a rising price target, it might be time to take another look at Merchants Bancorp.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Merchants Bancorp analysts - going out to 2021, 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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