Velocity Financial, Inc. Just Missed Earnings - But Analysts Have Updated Their Models

Velocity Financial, Inc. (NYSE:VEL) missed earnings with its latest quarterly results, disappointing overly-optimistic forecasters. Velocity Financial delivered a grave earnings miss, with both revenues (US$13m) and statutory earnings per share (US$0.10) falling badly short of analyst expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Velocity Financial

Following the latest results, Velocity Financial's twin analysts are now forecasting revenues of US$75.7m in 2021. This would be a decent 9.1% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Velocity Financial forecast to report a statutory profit of US$0.61 per share. Before this earnings report, the analysts had been forecasting revenues of US$83.7m and earnings per share (EPS) of US$0.78 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.

The average price target climbed 6.0% to US$11.00despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Velocity Financial's rate of growth is expected to accelerate meaningfully, with the forecast 12% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 9.0% over the past year. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 3.6% annually. So it's clear with the acceleration in growth, Velocity Financial is expected to grow meaningfully faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Velocity Financial going out as far as 2022, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Velocity Financial that you need to be mindful of.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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