Earnings Release: Here's Why Analysts Cut Their Establishment Labs Holdings Inc. (NASDAQ:ESTA) Price Target To US$59.86

It's been a pretty great week for Establishment Labs Holdings Inc. (NASDAQ:ESTA) shareholders, with its shares surging 10% to US$41.49 in the week since its latest quarterly results. The results don't look great, especially considering that statutory losses grew 23% toUS$0.62 per share. Revenues of US$44m did beat expectations by 2.6%, but it looks like a bit of a cold comfort. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Establishment Labs Holdings

After the latest results, the seven analysts covering Establishment Labs Holdings are now predicting revenues of US$175.1m in 2024. If met, this would reflect a decent 16% improvement in revenue compared to the last 12 months. Losses are predicted to fall substantially, shrinking 24% to US$2.25. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$180.4m and losses of US$1.81 per share in 2024. So it's pretty clear the analysts have mixed opinions on Establishment Labs Holdings after this update; revenues were downgraded and per-share losses expected to increase.

The average price target fell 7.1% to US$59.86, implicitly signalling that lower earnings per share are a leading indicator for Establishment Labs Holdings' valuation. 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 Establishment Labs Holdings, with the most bullish analyst valuing it at US$75.00 and the most bearish at US$41.00 per share. 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. It's clear from the latest estimates that Establishment Labs Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 17% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.2% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Establishment Labs Holdings is expected to grow much faster than its 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 Establishment Labs Holdings. They also downgraded Establishment Labs Holdings' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Establishment Labs Holdings' 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 Establishment Labs Holdings going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Establishment Labs Holdings , and understanding these should be part of your investment process.

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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.