Stock Analysis

Downgrade: Here's How Analysts See EKF Diagnostics Holdings plc (LON:EKF) Performing In The Near Term

  •  Updated
AIM:EKF
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One thing we could say about the analysts on EKF Diagnostics Holdings plc (LON:EKF) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the three analysts covering EKF Diagnostics Holdings provided consensus estimates of UK£69m revenue in 2022, which would reflect an uncomfortable 16% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plummet 47% to UK£0.018 in the same period. Prior to this update, the analysts had been forecasting revenues of UK£83m and earnings per share (EPS) of UK£0.026 in 2022. Indeed, we can see that the analysts are a lot more bearish about EKF Diagnostics Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for EKF Diagnostics Holdings

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AIM:EKF Earnings and Revenue Growth March 31st 2022

It'll come as no surprise then, to learn that the analysts have cut their price target 16% to UK£0.81. 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 EKF Diagnostics Holdings analyst has a price target of UK£0.94 per share, while the most pessimistic values it at UK£0.62. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. We would highlight that sales are expected to reverse, with a forecast 16% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 16% 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 6.6% per year. It's pretty clear that EKF Diagnostics Holdings' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of EKF Diagnostics Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for EKF Diagnostics Holdings 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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