Decibel Cannabis Company Inc. (CVE:DB) Analysts Are Cutting Their Estimates: Here's What You Need To Know

Shareholders in Decibel Cannabis Company Inc. (CVE:DB) had a terrible week, as shares crashed 22% to CA$0.07 in the week since its latest first-quarter results. Revenues were CA$21m, and Decibel Cannabis was a dismal 12% short of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Decibel Cannabis

Taking into account the latest results, the three analysts covering Decibel Cannabis provided consensus estimates of CA$98.5m revenue in 2024, which would reflect a definite 12% decline over the past 12 months. Earnings are expected to improve, with Decibel Cannabis forecast to report a statutory profit of CA$0.02 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$108.3m and earnings per share (EPS) of CA$0.025 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the CA$0.37 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Decibel Cannabis analyst has a price target of CA$0.50 per share, while the most pessimistic values it at CA$0.25. 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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 16% by the end of 2024. This indicates a significant reduction from annual growth of 49% 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 9.6% per year. It's pretty clear that Decibel Cannabis' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Decibel Cannabis. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Decibel Cannabis. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Decibel Cannabis analysts - going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Decibel Cannabis that we have uncovered.

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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.