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Today is shaping up negative for RF Industries, Ltd. (NASDAQ:RFIL) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
After the downgrade, the consensus from RF Industries' solo analyst is for revenues of US$46m in 2020, which would reflect a definite 15% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analyst forecasting losses of US$0.01 per share in 2020. Previously, the analyst had been modelling revenues of US$65m and earnings per share (EPS) of US$0.35 in 2020. So we can see that the consensus has become notably more bearish on RF Industries' outlook with these numbers, making a pretty serious reduction to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 14% to US$7.75, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the RF Industries' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 15%, a significant reduction from annual growth of 16% 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 6.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - RF Industries is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analyst is expecting RF Industries to become unprofitable this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that RF Industries' 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for RF Industries going out as far as 2021, and you can see them 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. 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. Thank you for reading.