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Sharps Compliance Corp. Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

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Simply Wall St
·4 min read
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Last week, you might have seen that Sharps Compliance Corp. (NASDAQ:SMED) released its quarterly result to the market. The early response was not positive, with shares down 3.3% to US$6.10 in the past week. Revenues missed expectations, with sales of US$13m falling 11% short of forecasts. Earnings correspondingly dipped, with Sharps Compliance reporting a statutory loss of US$0.02 per share, where the analysts were expecting a profit. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sharps Compliance after the latest results.

View our latest analysis for Sharps Compliance

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Taking into account the latest results, the current consensus from Sharps Compliance's four analysts is for revenues of US$55.8m in 2021, which would reflect a decent 10% increase on its sales over the past 12 months. Statutory earnings per share are expected to nosedive 62% to US$0.03 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$58.3m and earnings per share (EPS) of US$0.11 in 2021. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

The analysts made no major changes to their price target of US$9.75, suggesting the downgrades are not expected to have a long-term impact on Sharps Compliance's 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. Currently, the most bullish analyst values Sharps Compliance at US$11.00 per share, while the most bearish prices it at US$9.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Sharps Compliance'shistorical trends, as next year's 10% revenue growth is roughly in line with 9.8% annual revenue growth 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 revenues grow 6.8% per year. So it's pretty clear that Sharps Compliance is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sharps Compliance. They also downgraded their revenue estimates, although industry data suggests that Sharps Compliance's revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$9.75, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Sharps Compliance. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Sharps Compliance going out to 2025, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 2 warning signs for Sharps Compliance that you need to be mindful of.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.