Nanosonics Limited (ASX:NAN) Analysts Just Cut Their EPS Forecasts

One thing we could say about the analysts on Nanosonics Limited (ASX:NAN) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Shares are up 5.8% to AU$4.77 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the current consensus from Nanosonics' eleven analysts is for revenues of AU$118m in 2022 which - if met - would reflect a meaningful 14% increase on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of AU$0.002 per share in 2022. Previously, the analysts had been modelling revenues of AU$132m and earnings per share (EPS) of AU$0.032 in 2022. There looks to have been a major change in sentiment regarding Nanosonics' prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for Nanosonics

The consensus price target fell 13% to AU$5.25, implicitly signalling that lower earnings per share are a leading indicator for Nanosonics' valuation. 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 Nanosonics at AU$7.67 per share, while the most bearish prices it at AU$3.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Nanosonics'historical trends, as the 14% annualised revenue growth to the end of 2022 is roughly in line with the 14% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 12% annually. So although Nanosonics is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Nanosonics to become unprofitable this year. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Nanosonics.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that Nanosonics could now be moderately overvalued. You can learn more about our valuation methodology for 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.

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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.