One Genetic Signatures Limited (ASX:GSS) Analyst Just Made A Major Cut To Next Year's Estimates

By
Simply Wall St
Published
June 29, 2021
ASX:GSS
Source: Shutterstock

One thing we could say about the covering analyst on Genetic Signatures Limited (ASX:GSS) - 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 analyst has soured majorly on the business.

After the downgrade, the consensus from Genetic Signatures' solitary analyst is for revenues of AU$28m in 2021, which would reflect a noticeable 3.9% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to tumble 70% to AU$0.01 in the same period. Previously, the analyst had been modelling revenues of AU$34m and earnings per share (EPS) of AU$0.037 in 2021. Indeed, we can see that the analyst is a lot more bearish about Genetic Signatures' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Genetic Signatures

earnings-and-revenue-growth
ASX:GSS Earnings and Revenue Growth June 29th 2021

The analyst made no major changes to their price target of AU$3.20, suggesting the downgrades are not expected to have a long-term impact on Genetic Signatures' valuation.

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 would highlight that sales are expected to reverse, with a forecast 7.6% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 43% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 13% per year. It's pretty clear that Genetic Signatures' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Genetic Signatures. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Genetic Signatures' revenues are expected to grow 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 Genetic Signatures after the downgrade.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Genetic Signatures' business, like concerns around earnings quality. Learn more, and discover the 1 other concern we've identified, 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. 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.
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