Time To Worry? Analysts Just Downgraded Their Sharps Compliance Corp. (NASDAQ:SMED) Outlook

Today is shaping up negative for Sharps Compliance Corp. (NASDAQ:SMED) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the latest downgrade, the current consensus, from the five analysts covering Sharps Compliance, is for revenues of US$66m in 2022, which would reflect a noticeable 6.5% reduction in Sharps Compliance's sales over the past 12 months. Statutory earnings per share are anticipated to crater 58% to US$0.26 in the same period. Previously, the analysts had been modelling revenues of US$80m and earnings per share (EPS) of US$0.52 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Sharps Compliance

The consensus price target fell 15% to US$17.25, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Sharps Compliance, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$13.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 6.5% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 12% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.3% annually for the foreseeable future. It's pretty clear that Sharps Compliance's revenues are expected to perform substantially worse than 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 Sharps Compliance. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Sharps Compliance going forwards.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Sharps Compliance's business, like recent substantial insider selling. For more information, you can click here to discover this and the 3 other flags we've identified.

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.
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