Bullish: Analysts Just Made A Massive Upgrade To Their Orrstown Financial Services, Inc. (NASDAQ:ORRF) Forecasts

Orrstown Financial Services, Inc. (NASDAQ:ORRF) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

After the upgrade, the consensus from Orrstown Financial Services' four analysts is for revenues of US$90m in 2021, which would reflect a considerable 15% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to decline 10% to US$2.17 in the same period. Previously, the analysts had been modelling revenues of US$75m and earnings per share (EPS) of US$1.51 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

See our latest analysis for Orrstown Financial Services

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$20.75, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Orrstown Financial Services, with the most bullish analyst valuing it at US$21.00 and the most bearish at US$20.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Orrstown Financial Services is an easy business to forecast or the underlying assumptions are obvious.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 15% revenue decline a notable change from historical growth of 16% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.5% next year. It's pretty clear that Orrstown Financial Services' 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. 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 Orrstown Financial Services could be a good candidate for more research.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Orrstown Financial Services 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.

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