The latest analyst coverage could presage a bad day for LiqTech International, Inc. (NASDAQ:LIQT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the most recent consensus for LiqTech International from its three analysts is for revenues of US$26m in 2021 which, if met, would be a major 67% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 39% to US$0.37. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$42m and losses of US$0.29 per share in 2021. 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.
The consensus price target fell 15% to US$9.67, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 LiqTech International at US$15.00 per share, while the most bearish prices it at US$6.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 LiqTech International’s rate of growth is expected to accelerate meaningfully, with the forecast 179% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 14% 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 7.8% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that LiqTech International is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we’d understand if readers now felt a bit wary of LiqTech International.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple LiqTech International analysts – going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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