Analysts Are More Bearish On MDA Ltd. (TSE:MDA) Than They Used To Be

Market forces rained on the parade of MDA Ltd. (TSE:MDA) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After this downgrade, MDA's four analysts are now forecasting revenues of CA$679m in 2022. This would be a major 33% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 480% to CA$0.21. Previously, the analysts had been modelling revenues of CA$760m and earnings per share (EPS) of CA$0.24 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.

View our latest analysis for MDA

Despite the cuts to forecast earnings, there was no real change to the CA$12.80 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on MDA, with the most bullish analyst valuing it at CA$15.00 and the most bearish at CA$10.00 per share. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting MDA's growth to accelerate, with the forecast 77% annualised growth to the end of 2022 ranking favourably alongside historical growth of 1.1% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that MDA is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of MDA.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple MDA analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.