Model N, Inc. (NYSE:MODN) Just Reported First-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

A week ago, Model N, Inc. (NYSE:MODN) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. Results overall were solid, with revenues arriving 2.1% better than analyst forecasts at US$63m. Higher revenues also resulted in substantially lower statutory losses which, at US$0.05 per share, were 2.1% smaller than the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Model N

After the latest results, the eleven analysts covering Model N are now predicting revenues of US$262.2m in 2024. If met, this would reflect a credible 3.3% improvement in revenue compared to the last 12 months. Model N is also expected to turn profitable, with statutory earnings of US$0.017 per share. Before this earnings announcement, the analysts had been modelling revenues of US$262.1m and losses of US$0.015 per share in 2024. Although we saw no serious change to the revenue outlook, the analysts have definitely increased their earnings estimates, estimating a profit next year, compared to previous forecasts of a loss. So it seems like the consensus has become substantially more bullish on Model N.

There's been no major changes to the consensus price target of US$31.00, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Model N at US$37.00 per share, while the most bearish prices it at US$25.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Model N's revenue growth is expected to slow, with the forecast 4.4% annualised growth rate until the end of 2024 being well below the historical 13% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Model N.

The Bottom Line

The most important thing to take away is that the analysts now expect Model N to become profitable next year, compared to previous expectations that it would report a loss. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$31.00, with the latest estimates not enough to have an impact on their price targets.

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 forecasts for Model N going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Model N that you need to take into consideration.

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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.