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Last week, you might have seen that Energy Focus, Inc. (NASDAQ:EFOI) released its full-year result to the market. The early response was not positive, with shares down 5.8% to US$0.33 in the past week. The statutory results were mixed overall, with revenues of US$13m in line with analyst forecasts, but losses of US$0.60 per share, some 5.3% larger than the analyst was predicting. This is an important time for investors, as they can track a company's performance in its report, look at what expert is 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 estimate to see what could be in store for next year.
After the latest results, the consensus from Energy Focus's one analyst is for revenues of US$12.4m in 2020, which would reflect a measurable 2.4% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 50% to US$0.30. Before this latest report, the consensus had been expecting revenues of US$14.6m and US$0.41 per share in losses. So there's been quite a change-up of views after the recent consensus updates, withthe analyst making a serious cut to their revenue forecasts while also reducing the estimated losses the business will incur.
The consensus price target fell 31% to US$2.75, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 26% per annum over the past five years.
The Bottom Line
The most obvious conclusion is that the analyst made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. Furthermore, the analyst also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Energy Focus. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2024, which can be seen for free on our platform here.
You still need to take note of risks, for example - Energy Focus has 5 warning signs (and 2 which are significant) we think you should know about.
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