Market forces rained on the parade of Indiva Limited (CVE:NDVA) shareholders today, when the covering analyst downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the latest consensus from Indiva's single analyst is for revenues of CA$49m in 2023, which would reflect a major 41% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 76% to CA$0.02. Prior to this update, the analyst had been forecasting revenues of CA$63m and earnings per share (EPS) of CA$0.01 in 2023. There looks to have been a major change in sentiment regarding Indiva's prospects, with a pretty serious reduction to revenues and the analyst now forecasting a loss instead of a profit.
View our latest analysis for Indiva
The consensus price target fell 30% to CA$0.35, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
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. We would highlight that Indiva's revenue growth is expected to slow, with the forecast 32% annualised growth rate until the end of 2023 being well below the historical 72% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 18% per year. So it's pretty clear that, while Indiva's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The biggest low-light for us was that the forecasts for Indiva dropped from profits to a loss next year. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Indiva.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Indiva going out as far as 2023, and you can see them 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.
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