There's been a notable change in appetite for RCM Technologies, Inc. (NASDAQ:RCMT) shares in the week since its quarterly report, with the stock down 17% to US$1.19. Revenues fell 8.6% short of expectations, at US$45m. Earnings correspondingly dipped, with RCM Technologies reporting a statutory loss of US$0.45 per share, whereas the analysts had previously modelled a profit in this period. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the recent earnings report, the consensus from twin analysts covering RCM Technologies is for revenues of US$173.4m in 2020, implying a noticeable 6.0% decline in sales compared to the last 12 months. RCM Technologies is also expected to turn profitable, with statutory earnings of US$0.33 per share. Before this earnings report, the analysts had been forecasting revenues of US$195.9m and earnings per share (EPS) of US$0.36 in 2020. It looks like sentiment has fallen somewhat in the aftermath of these results, with a real cut to revenue estimates and a minor downgrade to earnings per share numbers as well.
The analysts made no major changes to their price target of US$3.38, suggesting the downgrades are not expected to have a long-term impact on RCM Technologies'valuation.
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 highlight that sales are expected to reverse, with the forecast 6.0% revenue decline a notable change from historical growth of 1.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - RCM Technologies is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for RCM Technologies. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have analyst estimates for RCM Technologies going out as far as 2021, and you can see them free on our platform here.
You still need to take note of risks, for example - RCM Technologies has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
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