Meridian Corporation (NASDAQ:MRBK) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory 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. Investor sentiment seems to be improving too, with the share price up 5.7% to US$26.44 over the past 7 days. Could this big upgrade push the stock even higher?
After the upgrade, the consensus from Meridian's three analysts is for revenues of US$140m in 2021, which would reflect a perceptible 7.7% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to dive 21% to US$4.46 in the same period. Before this latest update, the analysts had been forecasting revenues of US$125m and earnings per share (EPS) of US$3.47 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 Meridian 7.1% to US$30.33 on the back of these upgrades. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Meridian analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$27.00. This is a very narrow spread of estimates, implying either that Meridian is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 10% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 31% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.6% per year. It's pretty clear that Meridian's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Meridian could be worth investigating further.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Meridian analysts - going out to 2023, 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.
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Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, and Maryland.
Undervalued with excellent balance sheet and pays a dividend.