May 28, 2022

Soknacki2014

The Number One Source For Business

Venus Concept Inc. Confounded Analyst Expectations With A Surprise Profit

Last week, you might have seen that Venus Concept Inc. (NASDAQ:VERO) released its second-quarter result to the market. The early response was not positive, with shares down 8.2% to US$1.91 in the past week. Venus Concept beat expectations by 6.5% with revenues of US$26m. It also surprised on the earnings front, with an unexpected statutory profit of US$0.01 per share a nice improvement on the losses that the analysts forecast. 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.

See our latest analysis for Venus Concept

earnings-and-revenue-growth

earnings-and-revenue-growth

After the latest results, the five analysts covering Venus Concept are now predicting revenues of US$105.4m in 2021. If met, this would reflect a meaningful 11% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 41% to US$0.38. Before this earnings announcement, the analysts had been modelling revenues of US$103.2m and losses of US$0.48 per share in 2021. So it seems there’s been a definite increase in optimism about Venus Concept’s future following the latest consensus numbers, with a considerable decrease in the loss per share forecasts in particular.

There was no major change to the consensus price target of US$5.55, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue 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. There are some variant perceptions on Venus Concept, with the most bullish analyst valuing it at US$8.25 and the most bearish at US$2.50 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn’t rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s clear from the latest estimates that Venus Concept’s rate of growth is expected to accelerate meaningfully, with the forecast 23% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 6.1% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.4% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Venus Concept is expected to grow much faster than its industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Venus Concept going out to 2023, and you can see them free on our platform here.

You still need to take note of risks, for example – Venus Concept has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.