On Monday, Piper Sandler adjusted its outlook for Newtek Business (NASDAQ:NEWT) Services Corp (NASDAQ:NEWT), a business services and financial company, reducing the price target from $13.00 to $11.00 while maintaining a Neutral rating. The revision follows NewtekOne's recent regulatory filing on Friday, which indicated the company's inability to timely file its annual report, also known as Form 10-K, due to identified weaknesses in its internal control over financial reporting.
The delay in filing is linked to the company's disclosure during its latest earnings release, which revealed that Newtek had to restate its financial statements for the first three quarters of 2023 due to previously made errors. The adjustment of the price target to $11 is based on a reduced earnings multiple of approximately 6 times the projected 2024 earnings per share (EPS), down from the previous 7 times.
Newtek, which transitioned into a bank early in 2023, has been navigating the complexities associated with financial reporting in its inaugural year in the banking sector. The company's stock has been trading at a discount compared to its industry peers, which analysts attribute to a series of non-accruals and changes in guidance over recent quarters.
Piper Sandler's decision to lower the price target reflects a diminished confidence in Newtek's forward-looking financial outlook. This sentiment is primarily due to the newly disclosed weaknesses in the company's internal financial controls, which have raised concerns about the robustness of its financial governance.
InvestingPro Insights
In light of Piper Sandler's recent adjustment of Newtek Business Services Corp's price target, investors may find the following InvestingPro Data and InvestingPro Tips particularly insightful:
InvestingPro Data shows that Newtek has a market capitalization of $256.92 million, with a compelling P/E Ratio of 6.43. Despite the recent concerns over internal controls, the company boasts a significant revenue growth of 214.76% in the last twelve months as of Q4 2023. Furthermore, Newtek has maintained a strong gross profit margin of 83.68% during the same period, signaling efficient operations and cost management.
Two InvestingPro Tips that may be of interest are:
1. Analysts predict the company will be profitable this year, which could indicate potential for future growth and stability.
2. Newtek pays a significant dividend to shareholders, having maintained dividend payments for 9 consecutive years, which may appeal to income-focused investors.
For those considering a deeper analysis, InvestingPro offers additional tips that could further inform investment decisions. There are 12 more InvestingPro Tips available, including insights on the company's cash burn rate, earnings revisions, and trading positions.
To access these tips, investors can visit https://www.investing.com/pro/NEWT and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This offer could be particularly valuable for those looking to navigate the complexities of investing in a company like Newtek, which is currently experiencing a transitional phase in its business model.
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