Digimarc Corporation (NASDAQ:DMRC) investors will be delighted, with the company turning in some strong numbers with its latest results. It looks like a positive result overall, with revenues of US$6.2m beating forecasts by 4.5%. Statutory losses of US$0.74 per share were 4.5% smaller than the analysts expected, likely helped along by the higher revenues. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the twin analysts covering Digimarc are now predicting revenues of US$26.0m in 2020. If met, this would reflect a solid 11% improvement in sales compared to the last 12 months. Losses are expected to hold steady at around US$2.79. Before this earnings announcement, the analysts had been modelling revenues of US$27.7m and losses of US$2.89 per share in 2020. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The consensus price target fell 17% to US$20.00, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Digimarc's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 11%, well above its historical decline of 0.4% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 12% next year. So while Digimarc's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Even so, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Digimarc , and understanding them should be part of your investment process.
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