Some Q4 Inc. (TSE:QFOR) Analysts Just Made A Major Cut To Next Year's Estimates

Today is shaping up negative for Q4 Inc. (TSE:QFOR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Q4 from its five analysts is for revenues of US$59m in 2022 which, if met, would be a solid 8.4% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$0.88 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$68m and losses of US$0.70 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Q4

The consensus price target fell 28% to US$4.68, implicitly signalling that lower earnings per share are a leading indicator for Q4's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Q4 analyst has a price target of US$7.56 per share, while the most pessimistic values it at US$4.54. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Q4's growth to accelerate, with the forecast 18% annualised growth to the end of 2022 ranking favourably alongside historical growth of 9.6% per annum over the past year. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Q4 is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Q4.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Q4 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.