Need To Know: This Analyst Just Made A Substantial Cut To Their GSE Systems, Inc. (NASDAQ:GVP) Estimates

The latest analyst coverage could presage a bad day for GSE Systems, Inc. (NASDAQ:GVP), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from GSE Systems' lone analyst is for revenues of US$48m in 2023, which would reflect a reasonable 2.8% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 38% to US$0.39. However, before this estimates update, the consensus had been expecting revenues of US$55m and US$0.15 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for GSE Systems

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that GSE Systems' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 3.8% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 15% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 12% annually for the foreseeable future. So although GSE Systems' revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at GSE Systems. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After a cut like that, investors could be forgiven for thinking the analyst is a lot more bearish on GSE Systems, and a few readers might choose to steer clear of the stock.

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 GSE Systems' business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other concerns we've identified.

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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.