It’s been a good week for Signature Bank (NASDAQ:SBNY) shareholders, because the company has just released its latest yearly results, and the shares gained 5.1% to US$146. Signature Bank reported in line with analyst predictions, delivering revenues of US$1.3b and statutory earnings per share of US$10.87, suggesting the business is executing well and in line with its plan. 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. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Signature Bank after the latest results.
Taking into account the latest results, the latest consensus from Signature Bank’s 14 analysts is for revenues of US$1.45b in 2020, which would reflect a solid 10% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to increase 3.9% to US$11.38. Before this earnings report, analysts had been forecasting revenues of US$1.42b and earnings per share (EPS) of US$11.15 in 2020. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
With these upgrades, we’re not surprised to see that analysts have lifted their price target 5.8% to US$160 per share. 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. The most optimistic Signature Bank analyst has a price target of US$175 per share, while the most pessimistic values it at US$142. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
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. Analysts are definitely expecting Signature Bank’s growth to accelerate, with the forecast 10% growth ranking favourably alongside historical growth of 8.3% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 4.9% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Signature Bank is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Signature Bank following these results. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Signature Bank. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Signature Bank analysts – going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Signature Bank’s balance sheet, and whether we think Signature Bank is carrying too much debt, for free on our platform here.
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