Last week saw the newest quarterly earnings release from Communications Systems, Inc. (NASDAQ:JCS), an important milestone in the company’s journey to build a stronger business. It was an okay report, and revenues came in at US$18m, approximately in line with analyst estimates leading up to the results announcement. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts’ statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Communications Systems from one analyst is for revenues of US$52.2m in 2020, which is a modest 2.5% increase on its sales over the past 12 months. Before this earnings result, analysts had predicted US$68.2m revenue in 2020, although there was no accompanying EPS estimate. It looks analysts have become a fair bit less optimistic on Communications Systems’s prospects, given the pretty serious reduction to revenue estimates after the latest results.
Additionally, the consensus price target for Communications Systems 33% to US$8.00, showing a clear increase in optimism from the analysts involved.
Further, we can compare these estimates to past performance, and see how Communications Systems forecasts compare to the wider market’s forecast performance. One thing stands out from these estimates, which is that analysts are forecasting Communications Systems to grow faster in the future than it has in the past, with revenues expected to grow 2.5%. If achieved, this would be a much better result than the 14% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.2% per year. So although Communications Systems’s revenue growth is expected to improve, it is still expected to grow slower than the market.
The Bottom Line
The most important thing to take away from these updates is that analysts are definitely optimistic on the business, given that they’ve begun forecasting positive per-share earnings for next year. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
We have estimates for Communications Systems from one covering analyst, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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