Regional Management Corp. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

As you might know, Regional Management Corp. (NYSE:RM) just kicked off its latest third-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 6.7% to hit US$91m. Regional Management also reported a statutory profit of US$1.01, which was an impressive 84% above what the analysts had forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Regional Management after the latest results.

NYSE:RM Earnings and Revenue Growth November 2nd 2020

After the latest results, the five analysts covering Regional Management are now predicting revenues of US$386.2m in 2021. If met, this would reflect a satisfactory 4.9% improvement in sales compared to the last 12 months. Per-share earnings are expected to step up 20% to US$3.08. In the lead-up to this report, the analysts had been modelling revenues of US$372.1m and earnings per share (EPS) of US$2.75 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a nice gain to earnings per share in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 6.8% to US$26.00per share. 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 Regional Management analyst has a price target of US$35.00 per share, while the most pessimistic values it at US$22.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Regional Management's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Regional Management's revenue growth will slow down substantially, with revenues next year expected to grow 4.9%, compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 8.5% next year. Factoring in the forecast slowdown in growth, it seems obvious that Regional Management is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Regional Management following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Regional Management going out to 2022, and you can see them free on our platform here..

It is also worth noting that we have found 5 warning signs for Regional Management (1 is concerning!) 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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