Analysts Just Slashed Their Omnicell, Inc. (NASDAQ:OMCL) EPS Numbers

Market forces rained on the parade of Omnicell, Inc. (NASDAQ:OMCL) shareholders today, when the analysts downgraded their forecasts for next year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the most recent consensus for Omnicell from its ten analysts is for revenues of US$1.4b in 2023 which, if met, would be a solid 11% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to shrink 7.9% to US$1.26 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.6b and earnings per share (EPS) of US$2.26 in 2023. Indeed, we can see that the analysts are a lot more bearish about Omnicell's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Our analysis indicates that OMCL is potentially undervalued!

The consensus price target fell 13% to US$126, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. Currently, the most bullish analyst values Omnicell at US$185 per share, while the most bearish prices it at US$115. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. It's pretty clear that there is an expectation that Omnicell's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 8.7% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. Compare this to the 281 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 7.6% per year. Factoring in the forecast slowdown in growth, it looks like Omnicell is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Omnicell. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Omnicell 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.