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One thing we could say about the analysts on Co-Diagnostics, Inc. (NASDAQ:CODX) - 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 the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Co-Diagnostics recently, with the stock price up a notable 13% to US$13.94 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
After the downgrade, the three analysts covering Co-Diagnostics are now predicting revenues of US$89m in 2021. If met, this would reflect a huge 87% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 40% to US$1.65. Previously, the analysts had been modelling revenues of US$104m and earnings per share (EPS) of US$1.94 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.
The consensus price target fell 13% to US$27.00, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on Co-Diagnostics, with the most bullish analyst valuing it at US$31.00 and the most bearish at US$20.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Co-Diagnostics' revenue growth is expected to slow, with the forecast 65% annualised growth rate until the end of 2021 being well below the historical 107% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.0% annually. Even after the forecast slowdown in growth, it seems obvious that Co-Diagnostics is also expected to grow faster than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Co-Diagnostics. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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.
That said, the analysts might have good reason to be negative on Co-Diagnostics, given recent substantial insider selling. Learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. 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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