There's been a major selloff in IRIDEX Corporation (NASDAQ:IRIX) shares in the week since it released its annual report, with the stock down 34% to US$1.74. The results were mixed overall, with revenues slightly ahead of analyst estimates at US$43m. Statutory losses by contrast were6.6% larger than predictions at US$0.64 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from IRIDEX's twin analysts is for revenues of US$45.1m in 2020, which would reflect a modest 3.8% increase on its sales over the past 12 months. Statutory losses are forecast to balloon 33% to US$0.43 per share. Before this earnings announcement, analysts had been forecasting revenues of US$45.5m and losses of US$0.42 per share in 2020. Although the revenue estimates have not really changed, we can see there's been a earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
Analysts trimmed their valuations, with the average price target falling 28% to US$5.75, with the ongoing losses seemingly weighing on sentiment, despite no real changes to the earnings forecasts.
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. For example, we noticed that IRIDEX's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 3.8%, well above its historical decline of 0.1% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 7.7% next year. So although IRIDEX's revenue growth is expected to improve, it is still expected to grow slower than the market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that IRIDEX's revenues are expected to perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.
We also provide an overview of the IRIDEX Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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