The analysts covering IsoRay, Inc. (NYSEMKT:ISR) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the most recent consensus for IsoRay from its two analysts is for revenues of US$11m in 2021 which, if met, would be a solid 14% increase on its sales over the past 12 months. Losses are expected to increase slightly, to US$0.055 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$14m and losses of US$0.04 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target was broadly unchanged at US$1.43, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values IsoRay at US$1.60 per share, while the most bearish prices it at US$1.25. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the IsoRay's past performance and to peers in the same industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 14%, in line with its 16% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 20% per year. So although IsoRay is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on IsoRay after the downgrade.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with IsoRay, including a short cash runway. Learn more, and discover the 4 other flags we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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