Flagstar Bancorp, Inc.’s (NYSE:FBC) latest earnings update in December 2018 suggested that the company gained from a substantial tailwind, more than doubling its earnings from the prior year. Today I want to provide a brief commentary on how market analysts view Flagstar Bancorp’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for this coming year seems rather muted, with earnings increasing by a single digit 5.7%. The growth outlook in the following year seems much more buoyant with rates generating double digit 19% compared to today’s earnings, and finally hitting US$255m by 2022.
Even though it’s useful to understand the growth year by year relative to today’s value, it may be more insightful to evaluate the rate at which the company is moving every year, on average. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Flagstar Bancorp’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 9.1%. This means, we can anticipate Flagstar Bancorp will grow its earnings by 9.1% every year for the next few years.
For Flagstar Bancorp, there are three pertinent aspects 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 FBC 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 FBC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FBC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.