Nanosonics Limited (ASX:NAN) Just Reported Earnings, And Analysts Cut Their Target Price

There's been a notable change in appetite for Nanosonics Limited (ASX:NAN) shares in the week since its interim report, with the stock down 12% to AU$2.63. The result was fairly weak overall, with revenues of AU$80m being 6.1% less than what the analysts had been modelling. 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. 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 Nanosonics

Following the latest results, Nanosonics' nine analysts are now forecasting revenues of AU$167.7m in 2024. This would be an okay 2.2% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to tumble 41% to AU$0.031 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$169.8m and earnings per share (EPS) of AU$0.028 in 2024. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.

The average the analysts price target fell 12% to AU$3.32, suggesting thatthe analysts have other concerns, and the improved earnings per share outlook was not enough to allay them. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Nanosonics, with the most bullish analyst valuing it at AU$4.20 and the most bearish at AU$2.75 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Nanosonics' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.5% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% 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 Nanosonics.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Nanosonics following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Nanosonics' revenue is expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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

You can also see our analysis of Nanosonics' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.