Shareholders in FB Financial Corporation (NYSE:FBK) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The market seems to be pricing in some improvement in the business too, with the stock up 9.2% over the past week, closing at US$25.76. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
After this upgrade, FB Financial’s five analysts are now forecasting revenues of US$514m in 2020. This would be a sizeable 41% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to tumble 41% to US$1.30 in the same period. Prior to this update, the analysts had been forecasting revenues of US$448m and earnings per share (EPS) of US$0.94 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$28.63, suggesting that the forecast performance does not have a long term impact on the company’s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on FB Financial, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$24.50 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that the analysts have a clear view on its prospects.
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. It’s clear from the latest estimates that FB Financial’s rate of growth is expected to accelerate meaningfully, with the forecast 41% revenue growth noticeably faster than its historical growth of 14% 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 2.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect FB Financial 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. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive – assuming these forecasts are met! So FB Financial could be a good candidate for more research.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple FB Financial analysts – going out to 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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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