Time To Worry? Analysts Are Downgrading Their Clearfield, Inc. (NASDAQ:CLFD) Outlook
Market forces rained on the parade of Clearfield, Inc. (NASDAQ:CLFD) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from five analysts covering Clearfield is for revenues of US$282m in 2023, implying a not inconsiderable 13% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to nosedive 49% to US$1.83 in the same period. Before this latest update, the analysts had been forecasting revenues of US$366m and earnings per share (EPS) of US$3.98 in 2023. Indeed, we can see that the analysts are a lot more bearish about Clearfield's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for Clearfield
It'll come as no surprise then, to learn that the analysts have cut their price target 38% to US$53.75. 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 Clearfield, with the most bullish analyst valuing it at US$86.00 and the most bearish at US$34.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 would highlight that sales are expected to reverse, with a forecast 24% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 33% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.8% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Clearfield is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Clearfield's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
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 Clearfield's business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other flag 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.
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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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