Nanosonics Limited (ASX:NAN) shares fell 6.7% to AU$6.80 in the week since its latest half-yearly results. Overall the results were a little better than analysts were expecting, with revenues beating forecasts by 2.0%to hit AU$49m. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Nanosonics's six analysts is for revenues of AU$104.4m in 2020, which would reflect a notable 13% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be AU$0.04, roughly flat on the last 12 months. Before this earnings report, analysts had been forecasting revenues of AU$104.5m and earnings per share (EPS) of AU$0.04 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target rose 5.8% to AU$6.09 despite there being no meaningful change to earnings estimates. It could be that analysts are reflecting the predictability of Nanosonics's earnings by assigning a price premium. 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 Nanosonics, with the most bullish analyst valuing it at AU$7.79 and the most bearish at AU$4.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Further, we can compare these estimates to past performance, and see how Nanosonics forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Nanosonics's revenue growth will slow down substantially, with revenues next year expected to grow 13%, compared to a historical growth rate of 25% over the past five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 13% per year. So it's pretty clear that, while Nanosonics's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Nanosonics going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Nanosonics Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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