Growth Investors: Industry Analysts Just Upgraded Their Cogstate Limited (ASX:CGS) Revenue Forecasts By 11%

Cogstate Limited (ASX:CGS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The market seems to be pricing in some improvement in the business too, with the stock up 7.1% over the past week, closing at AU$1.43. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

Following the upgrade, the most recent consensus for Cogstate from its four analysts is for revenues of US$46m in 2023 which, if met, would be a solid 12% increase on its sales over the past 12 months. Statutory earnings per share are supposed to plummet 42% to US$0.012 in the same period. Before this latest update, the analysts had been forecasting revenues of US$42m and earnings per share (EPS) of US$0.012 in 2023. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.

View our latest analysis for Cogstate

It may not be a surprise to see that the analysts have reconfirmed their price target of AU$1.92, implying that the uplift in sales is not expected to greatly contribute to Cogstate's valuation in the near term. 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$1.31. This shows there is still some 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Cogstate's rate of growth is expected to accelerate meaningfully, with the forecast 24% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 14% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 19% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Cogstate to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Cogstate.

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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.