Earnings Release: Here's Why Analysts Cut Their HighCom Limited (ASX:HCL) Price Target To AU$0.34

HighCom Limited (ASX:HCL) just released its latest half-year results and things are looking bullish. Revenues beat expectations coming in atAU$15m, ahead of estimates by 6.8%. Statutory losses were somewhat smaller thanthe analysts expected, coming in at AU$0.13 per share. The 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for HighCom

Taking into account the latest results, the current consensus, from the twin analysts covering HighCom, is for revenues of AU$48.9m in 2024. This implies a definite 13% reduction in HighCom's revenue over the past 12 months. Losses are expected to increase slightly, to AU$0.14 per share. Before this earnings announcement, the analysts had been modelling revenues of AU$47.7m and losses of AU$0.10 per share in 2024. While this year's revenue estimates increased, there was also a very substantial increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

Spiting the revenue upgrading, the average price target fell 53% to AU$0.34, clearly signalling that higher forecast losses are a valuation concern.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the HighCom's past performance and to peers in the same industry. We would highlight that revenue is expected to reverse, with a forecast 24% annualised decline to the end of 2024. That is a notable change from historical growth of 21% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - HighCom is expected to lag the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at HighCom. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of HighCom's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on HighCom. Long-term earnings power is much more important than next year's profits. We have analyst estimates for HighCom going out as far as 2026, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for HighCom 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.