January 26, 2022

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Information Services Group, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

Shareholders in Information Services Group, Inc. (NASDAQ:III) had a terrible week, as shares crashed 31% to US$1.89 in the week since its latest yearly results. It looks like a credible result overall – although revenues of US$266m were in line with what analysts predicted, Information Services Group surprised by delivering a statutory profit of US$0.07 per share, a notable 17% above expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Information Services Group after the latest results.

View our latest analysis for Information Services Group

NasdaqGM:III Past and Future Earnings, March 14th 2020

Taking into account the latest results, Information Services Group’s four analysts currently expect revenues in 2020 to be US$267.4m, approximately in line with the last 12 months. Statutory per share are forecast to be US$0.07, approximately in line with the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$280.5m and earnings per share (EPS) of US$0.085 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the US$5.63 price target, showing that analysts don’t think the changes have a meaningful impact on the stock’s intrinsic value. 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 Information Services Group at US$6.00 per share, while the most bearish prices it at US$5.25. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.

Further, we can compare these estimates to past performance, and see how Information Services Group forecasts compare to the wider market’s forecast performance. We would highlight that Information Services Group’s revenue growth is expected to slow, with forecast 0.6% increase next year well below the historical 6.9%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 11% per year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Information Services Group.

The Bottom Line

The most important thing to take away is that 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 revenues will perform worse than the wider market. The consensus price target held steady at US$5.63, with the latest estimates not enough to have an impact on analysts’ estimated valuations.

With that in mind, we wouldn’t be too quick to come to a conclusion on Information Services Group. 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 Information Services Group going out to 2024, and you can see them free on our platform here..

You can also view our analysis of Information Services Group’s balance sheet, and whether we think Information Services Group is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at [email protected] 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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