U.S. markets closed

Earnings Beat: Accuray Incorporated Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St

Accuray Incorporated (NASDAQ:ARAY) shares fell 3.1% to US$3.81 in the week since its latest second-quarter results. Although revenues of US$99m were in line with analyst expectations, Accuray surprised on the earnings front, with an unexpected (statutory) profit of US$0.12 per share a nice improvement on the losses that analysts forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Accuray after the latest results.

Check out our latest analysis for Accuray

NasdaqGS:ARAY Past and Future Earnings, January 31st 2020

Following last week's earnings report, Accuray's five analysts are forecasting 2020 revenues to be US$412.9m, approximately in line with the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.01 per share. Before this latest report, the consensus had been expecting revenues of US$414.3m and US$0.16 per share in losses. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the sizeable expansion in earnings per share expectations following these results.

The average analyst price target rose 11% to US$7.50, with analyst signalling that the forecast reduction in losses would be a positive for the stock's valuation. 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. There are some variant perceptions on Accuray, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$4.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Accuray's revenue growth is expected to slow, with forecast 1.0% increase next year well below the historical 1.7%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 8.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Accuray.

The Bottom Line

The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Accuray. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Accuray analysts - going out to 2022, and you can see them free on our platform here.

It might also be worth considering whether Accuray's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.