Tactile Systems Technology, Inc. (NASDAQ:TCMD) shareholders are probably feeling a little disappointed, since its shares fell 5.3% to US$36.29 in the week after its latest third-quarter results. It was overall a positive result, with revenues beating expectations by 5.4% to hit US$49m. Tactile Systems Technology also reported a statutory profit of US$0.12, which was a nice improvement from the loss that the analysts were predicting. 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.
Taking into account the latest results, the current consensus from Tactile Systems Technology's six analysts is for revenues of US$230.0m in 2021, which would reflect a huge 24% increase on its sales over the past 12 months. Earnings are expected to improve, with Tactile Systems Technology forecast to report a statutory profit of US$0.44 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$233.7m and earnings per share (EPS) of US$0.45 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$63.25, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. Currently, the most bullish analyst values Tactile Systems Technology at US$70.00 per share, while the most bearish prices it at US$51.00. 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 Tactile Systems Technology shareholders.
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 can infer from the latest estimates that forecasts expect a continuation of Tactile Systems Technology'shistorical trends, as next year's 24% revenue growth is roughly in line with 24% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 10% next year. So although Tactile Systems Technology is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Tactile Systems Technology. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Tactile Systems Technology analysts - going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Tactile Systems Technology that you need to take into consideration.
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