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Last week, you might have seen that Inuvo, Inc. (NYSEMKT:INUV) released its third-quarter result to the market. The early response was not positive, with shares down 6.9% to US$0.38 in the past week. Revenues were in line with expectations, at US$9.2m, while statutory losses ballooned to US$0.03 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Inuvo from three analysts is for revenues of US$53.4m in 2021 which, if met, would be a credible 6.9% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 38% to US$0.07. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$54.4m and losses of US$0.053 per share in 2021. So it's pretty clear the analysts have mixed opinions on Inuvo even after this update; although they reconfirmed their revenue numbers, it came at the cost of a per-share losses.
The consensus price target held steady at US$1.08, seemingly implying that the higher forecast losses are not expected to have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Inuvo, with the most bullish analyst valuing it at US$2.25 and the most bearish at US$0.50 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Inuvo's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 6.9%, well above its historical decline of 4.5% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 13% next year. Although Inuvo's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Inuvo's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Inuvo going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Inuvo (1 doesn't sit too well with us) 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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