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On Wednesday, Stephens, a financial analyst firm, updated their outlook on Provident Bancorp (NASDAQ:PVBC), increasing the price target to $12.00 from the previous $11.00, while maintaining an Equal Weight rating for the stock. This adjustment follows Provident Bancorp's third-quarter financial results for 2024, which revealed earnings per share (EPS) of $0.04, falling short of the estimated $0.07.
The shortfall in EPS was attributed to a higher-than-expected provision for credit losses of $1.7 million, largely due to a $17.6 million enterprise value relationship now requiring a specific reserve of $8.8 million. The bank also saw non-performing assets (NPAs) to assets ratio increase to 2.25% following a $16.2 million construction and development (C&D) loan being transferred to non-accrual status.
Despite these challenges, Stephens expressed a positive outlook on the bank's credit situation, highlighting the stability in non-interest bearing deposits, which make up approximately 25% of total deposits. The bank's excess capital position was also noted, with a tangible common equity to total assets (TCE/TA) ratio standing at 13.7%. Additionally, there was a modest quarter-over-quarter growth in tangible book value (TBV), increasing by 0.5% to $12.76.
The firm's perspective on Provident Bancorp's future includes an expectation of below-average profitability, projecting a return on assets (ROA) of approximately 0.55%-0.60% in 2026. Nonetheless, Stephens has increased their operating EPS estimates for the years 2024, 2025, and 2026 by 32%, 14%, and 15% to $0.29, $0.41, and $0.58, respectively. The revised price target of $12.00 approximately equals 95% of the projected tangible book value.
InvestingPro Insights
Recent InvestingPro data provides additional context to Stephens' analysis of Provident Bancorp (NASDAQ:PVBC). The company's market capitalization stands at $183.59 million, with a P/E ratio of 34.53, significantly higher than industry averages. This aligns with an InvestingPro Tip indicating that PVBC is "trading at a high earnings multiple."
The bank's revenue for the last twelve months as of Q3 2024 was $55.22 million, with a concerning year-over-year revenue decline of 22.29%. This trend is reflected in another InvestingPro Tip, which notes that "analysts anticipate sales decline in the current year." Despite these challenges, PVBC maintains an operating income margin of 19.27%, showcasing some resilience in its core operations.
InvestingPro offers 6 additional tips for PVBC, providing a more comprehensive view of the company's financial health and market position. Investors seeking a deeper understanding of Provident Bancorp's prospects may find these insights valuable for their decision-making process.
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