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Inspire Medical Systems, Inc. (NYSE:INSP) Analysts Are Reducing Their Forecasts For This Year

Simply Wall St
·4 min read

One thing we could say about the analysts on Inspire Medical Systems, Inc. (NYSE:INSP) - 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) forecasts went under the knife, suggesting analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 13% to US$70.06 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After the downgrade, the nine analysts covering Inspire Medical Systems are now predicting revenues of US$90m in 2020. If met, this would reflect a notable 9.7% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$2.24 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$108m and losses of US$1.99 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Inspire Medical Systems

NYSE:INSP Past and Future Earnings April 15th 2020
NYSE:INSP Past and Future Earnings April 15th 2020

There was no major change to the consensus price target of US$75.22, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Inspire Medical Systems analyst has a price target of US$88.00 per share, while the most pessimistic values it at US$42.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Inspire Medical Systems' revenue growth is expected to slow, with forecast 9.7% increase next year well below the historical 46% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 15% per year. Factoring in the forecast slowdown in growth, it seems obvious that Inspire Medical Systems is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Inspire Medical Systems. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Inspire Medical Systems after the downgrade.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Inspire Medical Systems' financials, such as major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.