Last week, you might have seen that NuVasive, Inc. (NASDAQ:NUVA) released its full-year result to the market. The early response was not positive, with shares down 5.2% to US$75.16 in the past week. Revenues were US$1.2b, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.23, an impressive 22% ahead of estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the current consensus from NuVasive's 17 analysts is for revenues of US$1.23b in 2020, which would reflect an okay 5.3% increase on its sales over the past 12 months. Statutory earnings per share are expected to rise 7.3% to US$1.35. In the lead-up to this report, analysts had been modelling revenues of US$1.23b and earnings per share (EPS) of US$1.66 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$81.75, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic NuVasive analyst has a price target of US$93.00 per share, while the most pessimistic values it at US$56.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. We would highlight that NuVasive's revenue growth is expected to slow, with forecast 5.3% increase next year well below the historical 8.9%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.9% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect NuVasive to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for NuVasive. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that NuVasive's revenues are expected to perform worse than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for NuVasive going out to 2024, and you can see them free on our platform here.
You can also view our analysis of NuVasive's balance sheet, and whether we think NuVasive is carrying too much debt, for free on our platform here.
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