Yahoo Finance Cogstate Limited (ASX:CGS) Analysts Just Slashed This Year's Estimates
Today is shaping up negative for Cogstate Limited (ASX:CGS) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 31% to AU$1.55 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following this downgrade, Cogstate's four analysts are forecasting 2023 revenues to be US$42m, approximately in line with the last 12 months. Statutory earnings per share are supposed to tumble 42% to US$0.012 in the same period. Prior to this update, the analysts had been forecasting revenues of US$47m and earnings per share (EPS) of US$0.051 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
See our latest analysis for Cogstate
Despite the cuts to forecast earnings, there was no real change to the AU$1.96 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Cogstate at AU$2.26 per share, while the most bearish prices it at AU$1.46. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Cogstate shareholders.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Cogstate's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 2.6% growth on an annualised basis. This is compared to a historical growth rate of 14% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 19% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Cogstate.
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 Cogstate's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Cogstate after the downgrade.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Cogstate going out to 2025, and you can see them free on our platform here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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