It’s been a good week for Inseego Corp. (NASDAQ:INSG) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.9% to US$9.39. Results were mixed, with revenues of US$90m beating expectations by 12%. Inseego continued to be lossmaking, reporting a US$0.06 statutory loss per share, in line with analyst forecasts. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Inseego’s six analysts is for revenues of US$364.4m in 2021, which would reflect a huge 30% increase on its sales over the past 12 months. Earnings are expected to improve, with Inseego forecast to report a statutory profit of US$0.005 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$362.2m and earnings per share (EPS) of US$0.03 in 2021. So there’s definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$13.17, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. The most optimistic Inseego analyst has a price target of US$17.00 per share, while the most pessimistic values it at US$10.50. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It’s clear from the latest estimates that Inseego’s rate of growth is expected to accelerate meaningfully, with the forecast 30% revenue growth noticeably faster than its historical growth of 0.2%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.2% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Inseego to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$13.17, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn’t be too quick to come to a conclusion on Inseego. Long-term earnings power is much more important than next year’s profits. We have forecasts for Inseego going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we’ve discovered 3 warning signs for Inseego that you should be aware of.
This article by Simply Wall St is general in nature. 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.