One thing we could say about the analysts on Rubicon Technologies, Inc. (NYSE:RBT) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the three analysts covering Rubicon Technologies are now predicting revenues of US$721m in 2023. If met, this would reflect a credible 6.8% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$0.89 per share. However, prior to this estimates update, the consensus had been expecting revenues of US$867m and US$0.84 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for Rubicon Technologies
The consensus price target fell 23% to US$3.20, implicitly signaling that lower earnings per share are a leading indicator for Rubicon Technologies’ valuation. Fixing a single price target can be unwise though, since the consensus target is effective for the average analyst price target. 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. There are some variant perceptions on Rubicon Technologies, with the most bullish analysts valuing it at US$4.00 and the most bearish at US$2.60 per share. 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. We would highlight that Rubicon Technologies’ revenue growth is expected to be slow, with the forecast 6.8% annualised growth rate until the end of 2023 being well below the historical 9.8% pa growth over the last three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. Factoring in the forecast slowdown in growth, it seems obvious that Rubicon Technologies is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Rubicon Technologies. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 about Rubicon Technologies today.
After a downgrade like this, it’s pretty clear that previous forecasts were too optimistic. What’s more, we’ve spotted several possible issues with Rubicon Technologies’ business, like a short cash runway. For more information, you can click here to find this and the 2 other flags we’ve identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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.
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