Shareholders in SomnoMed Limited (ASX:SOM) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance.

After the upgrade, the consensus from SomnoMed’s dual analysts is for revenues of AU$52m in 2020, which would reflect a not inconsiderable 18% decline in sales compared to the last year of performance. Following this this upgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of AU$0.028 per share in 2020. Yet before this consensus update, the analysts had been forecasting revenues of AU$46m and losses of AU$0.10 per share in 2020. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

View our latest analysis for SomnoMed

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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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 18%, a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% next year. It’s pretty clear that SomnoMed’s revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around SomnoMed’s prospects. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. The clear improvement in sentiment should be enough to get most shareholders feeling more optimistic about SomnoMed’s future.

Analysts are definitely bullish on SomnoMed, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 3 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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.

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