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The analysts covering iCAD, Inc. (NASDAQ:ICAD) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At US$6.37, shares are up 8.3% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the downgrade, the most recent consensus for iCAD from its six analysts is for revenues of US$42m in 2022 which, if met, would be a notable 16% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 31% to US$0.24. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$47m and losses of US$0.14 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 9.3% to US$19.43, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic iCAD analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$13.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting iCAD's growth to accelerate, with the forecast 12% annualised growth to the end of 2022 ranking favourably alongside historical growth of 4.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 16% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, iCAD is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at iCAD. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of iCAD.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple iCAD analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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