Coastal Financial Corporation (NASDAQ:CCB) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on Coastal Financial too, with the stock up 18% to US$47.83 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the upgrade, the latest consensus from Coastal Financial's four analysts is for revenues of US$417m in 2023, which would reflect a huge 126% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 55% to US$4.17. Before this latest update, the analysts had been forecasting revenues of US$360m and earnings per share (EPS) of US$3.68 in 2023. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$61.75, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Coastal Financial, with the most bullish analyst valuing it at US$74.00 and the most bearish at US$54.00 per share. 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 Coastal Financial shareholders.
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. It's clear from the latest estimates that Coastal Financial's rate of growth is expected to accelerate meaningfully, with the forecast 92% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 35% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.0% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Coastal Financial is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Coastal Financial could be a good candidate for more research.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Coastal Financial analysts - going out to 2024, and you can see them 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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