One thing we could say about the analysts on iCAD, Inc. (NASDAQ:ICAD) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from iCAD's five analysts is for revenues of US$26m in 2020, which would reflect a not inconsiderable 16% decline in sales compared to the last year of performance. Losses are forecast to narrow 3.7% to US$1.09 per share. However, before this estimates update, the consensus had been expecting revenues of US$39m and US$0.53 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target was broadly unchanged at US$14.60, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 iCAD, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$13.00 per share. This is a very narrow spread of estimates, implying either that iCAD is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the iCAD's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that iCAD'sdecline is expected to accelerate, with revenues forecast to fall 16% next year, topping off a historical decline of 11% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 17% per year. So while a broad number of companies are forecast to decline, unfortunately iCAD is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. 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 iCAD after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for iCAD going out to 2024, and you can see them free on our platform here.
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.
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