Analysts Have Lowered Expectations For Sangoma Technologies Corporation (TSE:STC) After Its Latest Results

It's shaping up to be a tough period for Sangoma Technologies Corporation (TSE:STC), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Revenues missed expectations somewhat, coming in at US$62m, but statutory earnings fell catastrophically short, with a loss of US$0.084 some 28% larger than what the analysts had predicted. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Sangoma Technologies

Taking into account the latest results, the current consensus from Sangoma Technologies' eight analysts is for revenues of US$253.4m in 2023, which would reflect a reasonable 3.1% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 95% to US$0.23. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$274.2m and losses of US$0.20 per share in 2023. While this year's revenue estimates dropped there was also a notable increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

The consensus price target fell 7.1% to CA$13.62, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Sangoma Technologies, with the most bullish analyst valuing it at CA$20.10 and the most bearish at CA$8.99 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. It's pretty clear that there is an expectation that Sangoma Technologies' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 6.4% growth on an annualised basis. This is compared to a historical growth rate of 35% over the past five years. Compare this to the 14 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 5.2% per year. Factoring in the forecast slowdown in growth, it looks like Sangoma Technologies is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Sangoma Technologies. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sangoma Technologies' future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Sangoma Technologies going out to 2024, and you can see them free on our platform here.

Even so, be aware that Sangoma Technologies is showing 5 warning signs in our investment analysis , you should know about...

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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.