Customers Bancorp, Inc. (NYSE:CUBI) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investor sentiment seems to be improving too, with the share price up 9.3% to US$23.19 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the current consensus from Customers Bancorp's seven analysts is for revenues of US$461m in 2021 which - if met - would reflect an okay 4.1% increase on its sales over the past 12 months. Statutory earnings per share are presumed to leap 33% to US$4.99. Before this latest update, the analysts had been forecasting revenues of US$415m and earnings per share (EPS) of US$4.03 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 Customers Bancorp 15% to US$28.63 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. Currently, the most bullish analyst values Customers Bancorp at US$35.00 per share, while the most bearish prices it at US$23.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Customers Bancorp shareholders.
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 Customers Bancorp's revenue growth is expected to slow, with forecast 4.1% increase next year well below the historical 8.5% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.6% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Customers Bancorp.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. 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, Customers Bancorp could be worth investigating further.
Analysts are clearly in love with Customers Bancorp at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. You can learn more, and discover the 2 other flags we've identified, for 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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What are the risks and opportunities for Customers Bancorp?
Trading at 64.5% below our estimate of its fair value
Earnings are forecast to decline by an average of 2.4% per year for the next 3 years
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Customers Bancorp, Inc. operates as the bank holding company for Customers Bank that provides financial products and services to individual consumers, and small and middle market businesses.
Flawless balance sheet and undervalued.