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Information Services Group, Inc. (NASDAQ:III) Analysts Just Slashed This Year's Estimates

Simply Wall St

One thing we could say about the analysts on Information Services Group, Inc. (NASDAQ:III) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the four analysts covering Information Services Group provided consensus estimates of US$232m revenue in 2020, which would reflect a chunky 12% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.0033 per share in 2020. Prior to this update, the analysts had been forecasting revenues of US$267m and earnings per share (EPS) of US$0.07 in 2020. So we can see that the consensus has become notably more bearish on Information Services Group's outlook with these numbers, making a measurable cut 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.

Check out our latest analysis for Information Services Group

NasdaqGM:III Past and Future Earnings May 15th 2020
NasdaqGM:III Past and Future Earnings May 15th 2020

The consensus price target fell 16% to US$4.75, implicitly signalling that lower earnings per share are a leading indicator for Information Services Group's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Information Services Group analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$3.50. 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.

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 sales are expected to reverse, with the forecast 12% revenue decline a notable change from historical growth of 6.6% 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 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Information Services Group is expected to lag the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Information Services Group dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Information Services Group.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Information Services Group, including its declining profit margins. For more information, you can click here to discover this and the 3 other concerns we've identified.

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.

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.