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Live Oak Bancshares, Inc. (NASDAQ:LOB) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 5.6% over the past week, closing at US$60.32. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
After the upgrade, the five analysts covering Live Oak Bancshares are now predicting revenues of US$426m in 2021. If met, this would reflect a notable 11% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to descend 12% to US$3.49 in the same period. Previously, the analysts had been modelling revenues of US$373m and earnings per share (EPS) of US$2.60 in 2021. 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$74.00, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Live Oak Bancshares at US$80.00 per share, while the most bearish prices it at US$65.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
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. The analysts are definitely expecting Live Oak Bancshares' growth to accelerate, with the forecast 22% annualised growth to the end of 2021 ranking favourably alongside historical growth of 14% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Live Oak Bancshares to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Live Oak Bancshares.
Analysts are clearly in love with Live Oak Bancshares at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as dilutive stock issuance over the past year. You can learn more, and discover the 1 other flag we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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