Today is shaping up negative for Electro Optic Systems Holdings Limited (ASX:EOS) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the twin analysts covering Electro Optic Systems Holdings provided consensus estimates of AU$194m revenue in 2022, which would reflect an uneasy 8.7% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of AU$235m in 2022. The consensus view seems to have become more pessimistic on Electro Optic Systems Holdings, noting the measurable cut to revenue estimates in this update.

View our latest analysis for Electro Optic Systems Holdings  earnings-and-revenue-growth

Notably, the analysts have cut their price target 16% to AU$2.38, suggesting concerns around Electro Optic Systems Holdings' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Electro Optic Systems Holdings at AU$3.50 per share, while the most bearish prices it at AU$1.25. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Electro Optic Systems Holdings' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 8.7% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 40% 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 9.4% annually for the foreseeable future. It's pretty clear that Electro Optic Systems Holdings' revenues are expected to perform substantially worse than the wider industry.



The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Electro Optic Systems Holdings after today.

Want more information? We have estimates for Electro Optic Systems Holdings from its twin analysts out until 2024, and you can see them free on our platform here.

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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.