iCAD, Inc. (NASDAQ:ICAD) Analysts Just Cut Their EPS Forecasts Substantially

Market forces rained on the parade of iCAD, Inc. (NASDAQ:ICAD) shareholders today, when the analysts downgraded their forecasts for next year. 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 current consensus from iCAD's six analysts is for revenues of US$42m in 2022 which - if met - would reflect a decent 16% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 31% to US$0.24. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$47m and losses of US$0.14 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for iCAD

The consensus price target fell 9.3% to US$19.43, implicitly signalling that lower earnings per share are a leading indicator for iCAD's 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. The most optimistic iCAD analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$15.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await iCAD shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the iCAD's past performance and to peers in the same industry. It's clear from the latest estimates that iCAD's rate of growth is expected to accelerate meaningfully, with the forecast 12% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 4.9% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. So it's clear that despite the acceleration in growth, iCAD is expected to grow meaningfully slower than the industry average.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at iCAD. 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 iCAD.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple iCAD analysts - 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.