Certara, Inc. (NASDAQ:CERT) Consensus Forecasts Have Become A Little Darker Since Its Latest Report
Shareholders might have noticed that Certara, Inc. (NASDAQ:CERT) filed its quarterly result this time last week. The early response was not positive, with shares down 9.4% to US$16.67 in the past week. It was a credible result overall, with revenues of US$90m and statutory earnings per share of US$0.03 both in line with analyst estimates, showing that Certara is executing in line with expectations. Following the result, the 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Certara
Taking into account the latest results, Certara's eight analysts currently expect revenues in 2023 to be US$354.3m, approximately in line with the last 12 months. Statutory earnings per share are expected to tumble 28% to US$0.087 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$376.5m and earnings per share (EPS) of US$0.14 in 2023. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
It'll come as no surprise then, to learn that the analysts have cut their price target 9.7% to US$20.94. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Certara at US$27.00 per share, while the most bearish prices it at US$16.00. 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 Certara shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Certara's revenue growth is expected to slow, with the forecast 1.2% annualised growth rate until the end of 2023 being well below the historical 15% p.a. growth over the last three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Certara.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Certara. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Certara's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Certara analysts - going out to 2025, and you can see them free on our platform here.
You can also view our analysis of Certara's balance sheet, and whether we think Certara is carrying too much debt, for free on our platform here.
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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.
