Analysts Are More Bearish On Onto Innovation Inc. (NYSE:ONTO) Than They Used To Be
One thing we could say about the analysts on Onto Innovation Inc. (NYSE:ONTO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. The stock price has risen 6.1% to US$67.19 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
After the downgrade, the consensus from Onto Innovation's five analysts is for revenues of US$872m in 2023, which would reflect a considerable 11% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to decline 15% to US$3.51 in the same period. Prior to this update, the analysts had been forecasting revenues of US$971m and earnings per share (EPS) of US$4.25 in 2023. Indeed, we can see that the analysts are a lot more bearish about Onto Innovation's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Onto Innovation
The consensus price target fell 8.9% to US$86.00, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Onto Innovation analyst has a price target of US$95.00 per share, while the most pessimistic values it at US$75.00. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 8.7% by the end of 2023. This indicates a significant reduction from annual growth of 32% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.5% annually for the foreseeable future. It's pretty clear that Onto Innovation's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Onto Innovation's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Onto Innovation that suggests the company could be somewhat overvalued. Find out why, and see how we estimate the valuation for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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