Stock Analysis

Canadian Western Bank Beat Analyst Estimates: See What The Consensus Is Forecasting For This Year

TSX:CWB
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Canadian Western Bank (TSE:CWB) shareholders are probably feeling a little disappointed, since its shares fell 3.6% to CA$37.03 in the week after its latest full-year results. Canadian Western Bank missed revenue estimates by 3.2%, with sales of CA$989m, although statutory earnings per share (EPS) of CA$3.73 beat expectations, coming in 5.0% ahead of analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Canadian Western Bank after the latest results.

View our latest analysis for Canadian Western Bank

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TSX:CWB Earnings and Revenue Growth December 7th 2021

Taking into account the latest results, the consensus forecast from Canadian Western Bank's seven analysts is for revenues of CA$1.12b in 2022, which would reflect a solid 13% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to rise 2.8% to CA$3.76. In the lead-up to this report, the analysts had been modelling revenues of CA$1.12b and earnings per share (EPS) of CA$3.86 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at CA$42.58, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. Currently, the most bullish analyst values Canadian Western Bank at CA$48.00 per share, while the most bearish prices it at CA$39.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Canadian Western Bank's rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 8.5% 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 3.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Canadian Western Bank is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Canadian Western Bank. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at CA$42.58, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Canadian Western Bank going out to 2023, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 3 warning signs for Canadian Western Bank (1 makes us a bit uncomfortable!) that you should be aware of.

Valuation is complex, but we're helping make it simple.

Find out whether Canadian Western Bank is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.