Signature Bank’s (NASDAQ:SBNY) released its most recent earnings update in December 2018, which confirmed that the business gained from a strong tailwind, leading to a double-digit earnings growth of 31%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Signature Bank’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for next year seems positive, with earnings increasing by a robust 23%. This growth seems to continue into the following year with rates arriving at double digit 30% compared to today’s earnings, and finally hitting US$715m by 2022.
Although it’s useful to be aware of the growth rate each year relative to today’s figure, it may be more insightful determining the rate at which the earnings are rising or falling on average every year. The pro of this technique is that we can get a bigger picture of the direction of Signature Bank’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 12%. This means that, we can expect Signature Bank will grow its earnings by 12% every year for the next few years.
For Signature Bank, there are three key factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is SBNY worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SBNY is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SBNY? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.