Cambridge Bancorp (NASDAQ:CATC) just released its third-quarter report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$46m, some 4.7% above estimates, and statutory earnings per share (EPS) coming in at US$1.93, 22% ahead of expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Cambridge Bancorp from four analysts is for revenues of US$172.8m in 2021 which, if met, would be a substantial 35% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 42% to US$6.35. In the lead-up to this report, the analysts had been modelling revenues of US$170.8m and earnings per share (EPS) of US$5.88 in 2021. So the consensus seems to have become somewhat more optimistic on Cambridge Bancorp's earnings potential following these results.
The consensus price target rose 21% to US$74.00, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. Currently, the most bullish analyst values Cambridge Bancorp at US$80.00 per share, while the most bearish prices it at US$70.00. This is a very narrow spread of estimates, implying either that Cambridge 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. It's clear from the latest estimates that Cambridge Bancorp's rate of growth is expected to accelerate meaningfully, with the forecast 35% revenue growth noticeably faster than its historical growth of 9.7%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 1.5% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Cambridge Bancorp 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 Cambridge 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. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Cambridge Bancorp going out to 2022, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 1 warning sign for Cambridge Bancorp that you need to be mindful of.
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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