Earnings Miss: Integral Diagnostics Limited Missed EPS By 14% And Analysts Are Revising Their Forecasts

Simply Wall St

It's been a good week for Integral Diagnostics Limited (ASX:IDX) shareholders, because the company has just released its latest half-year results, and the shares gained 3.7% to AU$4.25. Revenues were in line with forecasts, at AU$132m, although statutory earnings per share came in 14% below what analysts expected, at AU$0.13 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Integral Diagnostics after the latest results.

Check out our latest analysis for Integral Diagnostics

ASX:IDX Past and Future Earnings, February 21st 2020

After the latest results, the seven analysts covering Integral Diagnostics are now predicting revenues of AU$290.4m in 2020. If met, this would reflect a solid 16% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to soar 26% to AU$0.16. In the lead-up to this report, analysts had been modelling revenues of AU$289.3m and earnings per share (EPS) of AU$0.16 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.

Despite cutting their earnings forecasts, analysts have lifted their price target 8.3% to AU$4.25, suggesting that these impacts are not expected to weigh on the stock's value in the long term. 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. There are some variant perceptions on Integral Diagnostics, with the most bullish analyst valuing it at AU$4.58 and the most bearish at AU$3.76 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

In addition, we can look to Integral Diagnostics's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting Integral Diagnostics's growth to accelerate, with the forecast 16% growth ranking favourably alongside historical growth of 13% per annum over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 4.8% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Integral Diagnostics to grow faster than the wider market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Integral Diagnostics. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Integral Diagnostics going out to 2024, and you can see them free on our platform here..

It might also be worth considering whether Integral Diagnostics's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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