Yahoo Finance Analysts Just Made A Neat Upgrade To Their PennyMac Financial Services, Inc. (NYSE:PFSI) Forecasts
Shareholders in PennyMac Financial Services, Inc. (NYSE:PFSI) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market seems to be pricing in some improvement in the business too, with the stock up 7.1% over the past week, closing at US$30.23. Could this big upgrade push the stock even higher?
Following the latest upgrade, PennyMac Financial Services' four analysts currently expect revenues in 2020 to be US$2.4b, approximately in line with the last 12 months. Statutory earnings per share are presumed to shoot up 21% to US$10.05. Prior to this update, the analysts had been forecasting revenues of US$2.2b and earnings per share (EPS) of US$8.71 in 2020. 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.
See our latest analysis for PennyMac Financial Services
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$39.71, 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 PennyMac Financial Services at US$57.00 per share, while the most bearish prices it at US$25.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.0%, a significant reduction from annual growth of 19% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.4% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - PennyMac Financial Services is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower 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 PennyMac Financial Services could be a good candidate for more research.
Analysts are clearly in love with PennyMac Financial Services at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as concerns around earnings quality. You can learn more, and discover the 1 other risk 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.
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