It's been a good week for Catasys, Inc. (NASDAQ:CATS) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.6% to US$15.60. Results look to have been somewhat negative - revenue fell 2.9% short of analyst estimates at US$8.8m, although losses were a relative bright spot. The per-share loss was US$0.52, 63% smaller than analysts were expecting prior to the result. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
After the latest results, the four analysts covering Catasys are now predicting revenues of US$88.6m in 2020. If met, this would reflect a huge 206% improvement in sales compared to the last 12 months. Losses are forecast to balloon 45% to US$0.62 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$82.7m and losses of US$0.61 per share in 2020. There's been a pretty noticeable increase in sentiment, with analysts upgrading revenues and making a earnings per share in particular
There were no major changes to the US$24.50 consensus price target despite the higher revenue estimates, with analysts seeming to believe that ongoing losses have a larger impact on the valuation than growing sales. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Catasys analyst has a price target of US$28.00 per share, while the most pessimistic values it at US$20.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Catasys shareholders.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Catasys's performance in recent years. Analysts are definitely expecting Catasys's growth to accelerate, with the forecast 206% growth ranking favourably alongside historical growth of 50% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 6.4% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Catasys is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Catasys analysts - going out to 2020, and you can see them free on our platform here.
You can also view our analysis of Catasys's balance sheet, and whether we think Catasys is carrying too much debt, for free on our platform here.
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