Granite Point Mortgage Trust Inc. (NYSE:GPMT) just released its latest quarterly report and things are not looking great. Granite Point Mortgage Trust missed earnings this time around, with US$27m revenue coming in 9.0% below what analysts had modelled. Earnings per share (EPS) of US$0.32 also fell short of expectations by 11%. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see whether the latest forecasts would suggest a change of heart on the company. We’ve gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Granite Point Mortgage Trust’s three analysts is for revenues of US$126m in 2020, which would reflect a notable 18% improvement in sales compared to the last 12 months. Earnings per share are expected to increase 8.8% to US$1.50. Yet prior to the latest earnings, analysts had been forecasting revenues of US$130m and earnings per share (EPS) of US$1.52 in 2020. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at US$19.10 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Granite Point Mortgage Trust at US$20.50 per share, while the most bearish prices it at US$18.50. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether analysts are more or less bullish relative to other companies in the market. It’s pretty clear that analysts expect Granite Point Mortgage Trust’s revenue growth will slow down substantially, with revenues next year expected to grow 18%, compared to a historical growth rate of 25% over the past three years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 32% next year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts also expect the wider market to grow faster than Granite Point Mortgage Trust.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$19.10, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Granite Point Mortgage Trust going out to 2021, and you can see them free on our platform here..
It might also be worth considering whether Granite Point Mortgage Trust’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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 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.