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Today is shaping up negative for Nuchev Limited (ASX:NUC) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the current consensus, from the solo analyst covering Nuchev, is for revenues of AU$15m in 2021, which would reflect a chunky 14% reduction in Nuchev's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 35% to AU$0.18. However, before this estimates update, the consensus had been expecting revenues of AU$19m and AU$0.17 per share in losses. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 14% to AU$1.80, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
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. We would highlight that sales are expected to reverse, with the forecast 14% revenue decline a notable change from historical growth of 50% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.0% annually for the foreseeable future. It's pretty clear that Nuchev's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of Nuchev's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Nuchev after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for 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.
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.
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