Analysts Have Been Trimming Their Think Research Corporation (CVE:THNK) Price Target After Its Latest Report

Investors in Think Research Corporation (CVE:THNK) had a good week, as its shares rose 5.4% to close at CA$0.39 following the release of its third-quarter results. It was a moderately negative result overall - revenue fell 4.1% short of analyst estimates at CA$18m, although at least statutory losses were marginally smaller than expected, at CA$0.11 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Think Research after the latest results.

Check out the opportunities and risks within the CA Healthcare Services industry.

Taking into account the latest results, the current consensus from Think Research's four analysts is for revenues of CA$87.1m in 2023, which would reflect a meaningful 14% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 55% to CA$0.19. Before this earnings announcement, the analysts had been modelling revenues of CA$91.1m and losses of CA$0.28 per share in 2023. While the revenue estimates fell, sentiment seems to have improved, with the analysts making a very promising decrease in losses per share in particular.

The consensus price target fell 40% to CA$0.61, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. 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 Think Research at CA$0.90 per share, while the most bearish prices it at CA$0.40. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Think Research's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Think Research's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 59% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 23% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Think Research.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Think Research's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Think Research going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 5 warning signs for Think Research that you should be aware of.

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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.