On Monday, Stephens updated its outlook on Guaranty Bancshares, Inc. (NYSE: NYSE:GNTY), increasing the price target to $40.00 from the previous $38.00 while sustaining an Overweight rating on the stock. The adjustment follows Guaranty Bancshares' third-quarter earnings per share (EPS) surpassing expectations, attributed to a decrease in loan loss provision expenses. The company's pre-provision net revenue (PPNR) was in line with the consensus forecast.
The analyst noted that, similar to the first half of 2024, Guaranty Bancshares experienced a contraction in loan balance by 14% on a last quarter annualized (LQA) basis. However, the net interest margin (NIM) has seen an expansion of 7 basis points.
It is anticipated that these trends will persist in the short term. The firm projects that these factors will contribute to an improvement in profitability throughout 2025, with the return on assets (ROA) potentially nearing 1.0% towards the end of that year.
Further, the company reported a $6 million decrease in substandard loans from the previous quarter and anticipates that credit trends will continue to improve in the fourth quarter of 2024. Guaranty Bancshares expects to resolve its largest non-performing asset (NPA) with no or an immaterial loss.
The revised $40 price target reflects a 1.4 times multiple of the analyst's 12-month forecast for tangible book value per share (TBVPS) and 15 times the estimated earnings per share for 2026. The Overweight rating indicates the firm's positive stance on the stock's performance potential.
InvestingPro Insights
Recent data from InvestingPro adds depth to Stephens' analysis of Guaranty Bancshares, Inc. (NYSE: GNTY). The company's P/E ratio of 14.73 suggests a relatively modest valuation, which aligns with the analyst's positive outlook and increased price target. This valuation metric becomes particularly interesting when considering that GNTY has been profitable over the last twelve months, with a diluted EPS of $2.27.
InvestingPro Tips highlight that Guaranty Bancshares has raised its dividend for 7 consecutive years, a fact that may appeal to income-focused investors. The current dividend yield stands at 2.76%, which could provide a steady income stream alongside potential capital appreciation. This consistent dividend growth aligns with the analyst's expectation of improving profitability through 2025.
It's worth noting that GNTY's revenue growth has been negative, with a -8.83% decline in the last twelve months. This contraction in revenue correlates with the loan balance reduction mentioned in the analyst report. However, the company's operating income margin of 28.03% indicates efficient operations despite the revenue challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. There are 3 more InvestingPro Tips available for GNTY, which could provide further context to the company's financial health and market position.
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