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Today is shaping up negative for Energy Focus, Inc. (NASDAQ:EFOI) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.
Following the downgrade, the consensus from single analyst covering Energy Focus is for revenues of US$14m in 2021, implying a discernible 6.0% decline in sales compared to the last 12 months. Per-share losses are expected to see a sharp uptick, reaching US$1.58. Yet before this consensus update, the analyst had been forecasting revenues of US$19m and losses of US$1.06 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
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. We would also point out that the forecast 12% annualised revenue decline to the end of 2021 is better than the historical trend, which saw revenues shrink 24% annually over the past five years Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 9.8% annually. So while a broad number of companies are forecast to grow, unfortunately Energy Focus is expected to see its sales affected worse than other companies in the industry.
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 Energy Focus. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Energy Focus' revenues are expected to grow slower than the wider market. After a cut like that, investors could be forgiven for thinking the analyst is a lot more bearish on Energy Focus, and a few readers might choose to steer clear of the stock.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Energy Focus' business, like a short cash runway. For more information, you can click here to discover this and the 3 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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