Masimo Corporation (NASDAQ:MASI) shareholders are probably feeling a little disappointed, since its shares fell 2.6% to US$129 in the week after its latest full-year results. The result was positive overall - although revenues of US$2.0b were in line with what the analysts predicted, Masimo surprised by delivering a statutory profit of US$1.51 per share, modestly greater than 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the eight analysts covering Masimo are now predicting revenues of US$2.10b in 2024. If met, this would reflect a satisfactory 2.6% improvement in revenue compared to the last 12 months. Per-share earnings are expected to jump 29% to US$1.99. Before this earnings report, the analysts had been forecasting revenues of US$2.09b and earnings per share (EPS) of US$1.97 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 6.5% to US$128. It looks as though they previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Masimo analyst has a price target of US$145 per share, while the most pessimistic values it at US$117. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
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. It's pretty clear that there is an expectation that Masimo's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.6% growth on an annualised basis. This is compared to a historical growth rate of 21% 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 7.8% 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 Masimo.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Masimo's revenue is expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes 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 Masimo. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Masimo analysts - going out to 2026, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Masimo (of which 1 shouldn't be ignored!) you should know about.
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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.