One Forecaster Is Now More Bearish On Nuchev Limited (ASX:NUC) Than They Used To Be

Market forces rained on the parade of Nuchev Limited (ASX:NUC) shareholders today, when the covering analyst downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the one analyst covering Nuchev provided consensus estimates of AU$15m revenue in 2021, which would reflect a not inconsiderable 14% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 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. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Nuchev

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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Nuchev's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 14%, a significant reduction from annual 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. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Nuchev is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Nuchev. 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Nuchev going out as far as 2023, 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.

If you decide to trade Nuchev, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.