It's been a mediocre week for Central Valley Community Bancorp (NASDAQ:CVCY) shareholders, with the stock dropping 12% to US$12.94 in the week since its latest quarterly results. Results look mixed - while revenue fell marginally short of analyst estimates at US$18m, statutory earnings beat expectations 6.1%, with Central Valley Community Bancorp reporting profits of US$0.35 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from Central Valley Community Bancorp's four analysts is for revenues of US$72.3m in 2021, which would reflect an okay 2.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to sink 11% to US$1.24 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$71.9m and earnings per share (EPS) of US$1.13 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$15.75, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Central Valley Community Bancorp analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$14.00. This is a very narrow spread of estimates, implying either that Central Valley Community Bancorp is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Central Valley Community Bancorp's revenue growth is expected to slow, with forecast 2.4% increase next year well below the historical 9.0%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.3% next year. Even after the forecast slowdown in growth, it seems obvious that Central Valley Community Bancorp is also expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Central Valley Community Bancorp's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Central Valley Community Bancorp going out to 2022, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Central Valley Community Bancorp (1 makes us a bit uncomfortable!) that you need to take into consideration.
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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