It’s taken a while for the Lloyds Banking Group (LSE: LLOY) share price to reward patient investors. Years of low bank stock valuations are finally working out.

We’re finally looking at a five-year gain of 180% for Lloyds. So is it time to sell up and take our profits? It depends on how we see the future shaping up. Past share price performance plays no part in that.

Analysts are still bullish, with an attractive Buy consensus at the moment. But their price targets are diverging. And when opinions start splitting, that can suggest the risks are rising. Still, at least none of the brokers I can see recommend we sell Lloyds.

Price targets

Looking at the City’s price targets does have me scratching my head a little. The thing is, the average price target stands at 64.4p right now. That’s about 19% below the Lloyds share price at the time of writing — and it’s a consensus Buy.

But a low estimate of 53p is dragging the average down. I can’t see every analysts’ individual take, and I don’t know who put out such a low price. But it looks like an old one, not updated for quite some time.

Recent target updates are more positive. Goldman Sachs is one of the latest to speak, having just reiterated the 99p it went with earlier in the month. And that marks a very attractive 25% premium on the latest price.

Earnings forecasts

Do earnings forecasts back up a bullish price outlook? Analysts expect a modest rise in earnings per share (EPS) this year, putting Lloyds on a price-to-earnings (P/E) ratio of 12. But they expect EPS to climb 60% between 2025 and 2027. And that could mean a P/E back down as low as 7.4 by the end of that year.

That’s if the share price doesn’t move. It would need to rise 60% to bring the P/E back in line with today’s. And that seems to fit in with the Goldman Sachs short-term target.

So, looking at price targets and actual earnings forecasts, it does seem like a bullish stance on Lloyds could be justified. But things are never quite so straightforward.

Recent events

Lloyds got a boost from the Supreme Court ruling on the car loan mis-selling case. The worst fears of shareholders did not unfold. Lloyds will still have to pay compensation, but the cash already set aside should covered it.

The price ticked up after the verdict. But a new threat of a windfall tax knocked the shares back a bit on Friday (29 August). They fell 3% on the day. The Institute for Public Policy Research says banks should be taxed to recover taxpayer money spent on the Bank of England’s earlier quantitative earnings programme.

That, plus the threat that falling interest rates pose for Lloyds’ lending margins, means there’s clearly risk in this investment. But for me, the potential long-term gains outweigh it. I’ll hold, and I’m thinking about buying more.