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It's been a good week for HealthStream, Inc. (NASDAQ:HSTM) shareholders, because the company has just released its latest annual results, and the shares gained 3.9% to US$23.91. Revenues of US$245m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.44, missing estimates by 3.8%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on HealthStream after the latest results.
Taking into account the latest results, HealthStream's four analysts currently expect revenues in 2021 to be US$246.8m, approximately in line with the last 12 months. The company is forecast to report a statutory loss of US$0.17 in 2021, a sharp decline from a profit over the last year. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$233.6m and earnings per share (EPS) of US$0.05 in 2021. Yet despite a small lift in revenues, the analysts are now forecasting a loss instead of a profit, which looks like a reduction in sentiment after the latest results.
The consensus price target stayed unchanged at US$24.00, seeming to suggest that higher forecast losses are not expected to have a long term impact on the 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. Currently, the most bullish analyst values HealthStream at US$30.00 per share, while the most bearish prices it at US$20.00. This shows there is still a bit of 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that HealthStream's revenue growth is expected to slow, with forecast 0.8% increase next year well below the historical 4.0%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 18% per year. Factoring in the forecast slowdown in growth, it seems obvious that HealthStream is also expected to grow slower than other industry participants.
The Bottom Line
The biggest low-light for us was that the forecasts for HealthStream dropped from profits to a loss next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at US$24.00, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for HealthStream going out to 2025, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for HealthStream that you should be aware of.
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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