SomnoMed Limited Reported A Surprise Loss, And Analysts Have Updated Their Forecasts
Last week, you might have seen that SomnoMed Limited (ASX:SOM) released its annual result to the market. The early response was not positive, with shares down 2.9% to AU$0.34 in the past week. It was a pretty negative result overall, with revenues of AU$115m missing analyst predictions by 4.2%. Worse, the business reported a statutory loss of AU$0.012 per share, a substantial decline on analyst expectations of a profit. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for SomnoMed from three analysts is for revenues of AU$121.6m in 2027. If met, it would imply a satisfactory 6.2% increase on its revenue over the past 12 months. Earnings are expected to improve, with SomnoMed forecast to report a statutory profit of AU$0.023 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$129.5m and earnings per share (EPS) of AU$0.025 in 2027. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
View our latest analysis for SomnoMed
The consensus price target fell 15% to AU$0.87, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values SomnoMed at AU$1.09 per share, while the most bearish prices it at AU$0.76. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SomnoMed shareholders.
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. We would highlight that SomnoMed's revenue growth is expected to slow, with the forecast 6.2% annualised growth rate until the end of 2027 being well below the historical 13% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than SomnoMed.
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. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on SomnoMed. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for SomnoMed going out to 2029, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 1 warning sign for SomnoMed that you need to be mindful of.
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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.