It’s been a good week for inTEST Corporation (NYSEMKT:INTT) shareholders, because the company has just released its latest first-quarter results, and the shares gained 5.2% to US$3.24. The results overall were pretty much dead in line with analyst forecasts; revenues were US$11m and statutory losses were US$0.11 per share. The 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 the analysts have changed their mind on inTEST after the latest results.
Check out our latest analysis for inTEST
Following the recent earnings report, the consensus from three analysts covering inTEST is for revenues of US$51.2m in 2020, implying a small 4.9% decline in sales compared to the last 12 months. The company is forecast to report a statutory loss of US$0.10 in 2020, a sharp decline from a profit over the last year. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$54.1m and losses of US$0.05 per share in 2020. So it’s pretty clear the analysts have mixed opinions on inTEST after this update; revenues were downgraded and per-share losses expected to increase.
The average price target fell 6.8% to US$6.83, implicitly signalling that lower earnings per share are a leading indicator for inTEST’s valuation. 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 inTEST at US$9.00 per share, while the most bearish prices it at US$5.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.9%, a significant reduction from annual growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – inTEST is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at inTEST. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of inTEST’s future valuation.
With that in mind, we wouldn’t be too quick to come to a conclusion on inTEST. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple inTEST analysts – going out to 2021, and you can see them free on our platform here.
Even so, be aware that inTEST is showing 4 warning signs in our investment analysis , you should know about…
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