It's been a good week for HealthStream, Inc. (NASDAQ:HSTM) shareholders, because the company has just released its latest first-quarter results, and the shares gained 8.0% to US$25.92. It looks like a credible result overall - although revenues of US$73m were what the analysts expected, HealthStream surprised by delivering a (statutory) profit of US$0.17 per share, an impressive 52% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from HealthStream's six analysts is for revenues of US$294.0m in 2024. This would reflect a reasonable 3.9% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to shrink 8.2% to US$0.54 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$293.6m and earnings per share (EPS) of US$0.51 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 5.6% to US$31.67, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values HealthStream at US$36.00 per share, while the most bearish prices it at US$27.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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 clear from the latest estimates that HealthStream's rate of growth is expected to accelerate meaningfully, with the forecast 5.3% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 2.8% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, HealthStream is expected to grow slower than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around HealthStream's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that HealthStream's revenue is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on HealthStream. 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 HealthStream going out to 2026, and you can see them free on our platform here..
Before you take the next step you should know about the 1 warning sign for HealthStream that we have uncovered.
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.