Bearish: Analysts Just Cut Their Lumos Diagnostics Holdings Limited (ASX:LDX) Revenue and EPS estimates

Market forces rained on the parade of Lumos Diagnostics Holdings Limited (ASX:LDX) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the dual analysts covering Lumos Diagnostics Holdings, is for revenues of US$14m in 2022, which would reflect a small 5.6% reduction in Lumos Diagnostics Holdings' sales over the past 12 months. Per-share losses are expected to explode, reaching US$0.15 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$21m and losses of US$0.11 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Lumos Diagnostics Holdings

The consensus price target was broadly unchanged at AU$0.39, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Lumos Diagnostics Holdings analyst has a price target of AU$0.50 per share, while the most pessimistic values it at AU$0.28. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2022. This indicates a significant reduction from annual growth of 23% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Lumos Diagnostics Holdings is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts 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. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Lumos Diagnostics Holdings after the downgrade.

That said, the analysts might have good reason to be negative on Lumos Diagnostics Holdings, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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.

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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.