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The analysts covering Lumos Diagnostics Holdings Limited (ASX:LDX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the dual analysts covering Lumos Diagnostics Holdings, is for revenues of US$14m in 2022, which would reflect a noticeable 5.6% reduction in Lumos Diagnostics Holdings’ sales over the past 12 months. Losses are supposed to balloon 37% to US$0.15 per share. However, before this estimates update, the consensus had been expecting revenues of US$21m and US$0.11 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for Lumos Diagnostics Holdings
There was no major change to the consensus price target of AU$0.39, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on Lumos Diagnostics Holdings, with the most bullish analyst valuing it at AU$0.50 and the most bearish at AU$0.28 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 11% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 23% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. It’s pretty clear that Lumos Diagnostics Holdings’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Lumos Diagnostics Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Lumos Diagnostics Holdings’ revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn’t be surprised if investors were a bit wary of Lumos Diagnostics Holdings.
As you can see, the analysts clearly aren’t bullish, and there might be good reason for that. We’ve identified some potential issues with Lumos Diagnostics Holdings’ financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other flags we’ve identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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.
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