Downgrade: Here's How Analysts See OverActive Media Corp. (CVE:OAM) Performing In The Near Term

The analysts covering OverActive Media Corp. (CVE:OAM) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from OverActive Media's twin analysts is for revenues of CA$18m in 2023, which would reflect a decent 17% improvement in sales compared to the last 12 months. Losses are supposed to balloon 28% to CA$0.18 per share. Yet before this consensus update, the analysts had been forecasting revenues of CA$25m and losses of CA$0.12 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Our analysis indicates that OAM is potentially overvalued!

The consensus price target fell 42% to CA$0.97, implicitly signalling that lower earnings per share are a leading indicator for OverActive Media's 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. The most optimistic OverActive Media analyst has a price target of CA$1.00 per share, while the most pessimistic values it at CA$0.95. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that OverActive Media's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 14% growth on an annualised basis. This is compared to a historical growth rate of 46% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 13% annually. So it's pretty clear that, while OverActive Media's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next 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. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of OverActive Media.

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 OverActive Media's business, like a short cash runway. Learn more, and discover the 2 other concerns 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.