The latest analyst coverage could presage a bad day for EDAP TMS S.A. (NASDAQ:EDAP), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

After the downgrade, the consensus from EDAP TMS' one analyst is for revenues of €27m in 2020, which would reflect a substantial 39% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analyst forecasting losses of €0.26 per share in 2020. Before this latest update, the analyst had been forecasting revenues of €52m and earnings per share (EPS) of €0.10 in 2020. There looks to have been a major change in sentiment regarding EDAP TMS' prospects, with a pretty serious reduction to revenues and the analyst now forecasting a loss instead of a profit.

Check out our latest analysis for EDAP TMS

The consensus price target fell 13% to US$5.25, implicitly signalling that lower earnings per share are a leading indicator for EDAP TMS' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values EDAP TMS at US$5.50 per share, while the most bearish prices it at US$5.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analyst is quite confident in their valuations, suggesting that EDAP TMS is an easy business to forecast or that the underlying assumptions are knowable.

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 39%, a significant reduction from annual growth of 9.7% 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 7.5% next year. It's pretty clear that EDAP TMS' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst is expecting EDAP TMS to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of EDAP TMS.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for EDAP TMS going out as far as 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.