The Consensus EPS Estimates For Edgio, Inc. (NASDAQ:EGIO) Just Fell Dramatically

One thing we could say about the analysts on Edgio, Inc. (NASDAQ:EGIO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After this downgrade, Edgio's eight analysts are now forecasting revenues of US$471m in 2023. This would be a substantial 49% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.36. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$554m and losses of US$0.13 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

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The consensus price target fell 39% to US$3.81, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic Edgio analyst has a price target of US$6.00 per share, while the most pessimistic values it at US$1.70. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. It's clear from the latest estimates that Edgio's rate of growth is expected to accelerate meaningfully, with the forecast 38% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 7.2% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Edgio to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than 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.

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 Edgio's business, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other flags we've identified, for 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.