One thing we could say about the analysts on Old Second Bancorp, Inc. (NASDAQ:OSBC) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the consensus from four analysts covering Old Second Bancorp is for revenues of US$93m in 2021, implying a disturbing 33% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to dip 5.2% to US$1.27 in the same period. Before this latest update, the analysts had been forecasting revenues of US$106m and earnings per share (EPS) of US$1.29 in 2021. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.
The average price target was steady at US$14.50 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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 Old Second Bancorp analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$14.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Old Second Bancorp is an easy business to forecast or the underlying assumptions are obvious.
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. We would highlight that sales are expected to reverse, with a forecast 55% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 8.0% 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 3.8% per year. It's pretty clear that Old Second Bancorp's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Old Second Bancorp's revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Old Second Bancorp after today.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Old Second Bancorp analysts - going out to 2023, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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