Results: Diagnósticos da América S.A. Delivered A Surprise Loss And Now Analysts Have New Forecasts

Diagnósticos da América S.A. (BVMF:DASA3) shareholders are probably feeling a little disappointed, since its shares fell 6.9% to R$22.95 in the week after its latest yearly results. Revenues fell 4.7% short of expectations, at R$10.0b. Earnings correspondingly dipped, with Diagnósticos da América reporting a statutory loss of R$0.37 per share, whereas the analysts had previously modelled a profit in this period. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Diagnósticos da América

Taking into account the latest results, the most recent consensus for Diagnósticos da América from seven analysts is for revenues of R$13.8b in 2022 which, if met, would be a substantial 38% increase on its sales over the past 12 months. Diagnósticos da América is also expected to turn profitable, with statutory earnings of R$0.94 per share. In the lead-up to this report, the analysts had been modelling revenues of R$13.9b and earnings per share (EPS) of R$1.90 in 2022. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

It might be a surprise to learn that the consensus price target fell 15% to R$45.44, with the analysts clearly linking lower forecast earnings to the performance of the stock price. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Diagnósticos da América at R$62.00 per share, while the most bearish prices it at R$32.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Diagnósticos da América's rate of growth is expected to accelerate meaningfully, with the forecast 38% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 25% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 21% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Diagnósticos da América is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Diagnósticos da América's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Diagnósticos da América. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Diagnósticos da América going out to 2024, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 3 warning signs for Diagnósticos da América (of which 1 is a bit concerning!) you should know about.

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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.