Earnings Release: Here's Why Analysts Cut Their Masimo Corporation (NASDAQ:MASI) Price Target To US$248

There's been a major selloff in Masimo Corporation (NASDAQ:MASI) shares in the week since it released its annual report, with the stock down 35% to US$152. The result was positive overall - although revenues of US$1.2b were in line with what the analysts predicted, Masimo surprised by delivering a statutory profit of US$3.98 per share, modestly greater than expected. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Masimo

After the latest results, the six analysts covering Masimo are now predicting revenues of US$1.35b in 2022. If met, this would reflect a notable 9.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 2.9% to US$4.28. Before this earnings report, the analysts had been forecasting revenues of US$1.34b and earnings per share (EPS) of US$4.34 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

With no major changes to earnings forecasts, the consensus price target fell 16% to US$248, suggesting that the analysts might have previously been hoping for an earnings upgrade. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Masimo, with the most bullish analyst valuing it at US$295 and the most bearish at US$200 per share. 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 Masimo shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Masimo's revenue growth is expected to slow, with the forecast 9.1% annualised growth rate until the end of 2022 being well below the historical 12% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.2% annually. Factoring in the forecast slowdown in growth, it looks like Masimo is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Masimo going out to 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Masimo you should be aware of.

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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.