Earnings Update: Cogstate Limited (ASX:CGS) Just Reported And Analysts Are Trimming Their Forecasts

Last week, you might have seen that Cogstate Limited (ASX:CGS) released its interim result to the market. The early response was not positive, with shares down 4.6% to AU$1.55 in the past week. Cogstate reported in line with analyst predictions, delivering revenues of US$20m and statutory earnings per share of US$0.042, suggesting the business is executing well and in line with its plan. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Cogstate

Taking into account the latest results, Cogstate's four analysts currently expect revenues in 2023 to be US$42.1m, approximately in line with the last 12 months. Statutory earnings per share are forecast to dive 42% to US$0.012 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$47.3m and earnings per share (EPS) of US$0.051 in 2023. Indeed, we can see that the analysts are a lot more bearish about Cogstate's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

The analysts made no major changes to their price target of AU$1.96, suggesting the downgrades are not expected to have a long-term impact on Cogstate's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Cogstate analyst has a price target of AU$2.26 per share, while the most pessimistic values it at AU$1.46. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cogstate's past performance and to peers in the same industry. 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 1.6% growth on an annualised basis. This is compared to a historical growth rate of 14% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 19% per year. 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 biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Cogstate. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at AU$1.96, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Cogstate analysts - going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Cogstate .

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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.