The latest analyst coverage could presage a bad day for Mach7 Technologies Limited (ASX:M7T), 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.

Following the downgrade, the current consensus from Mach7 Technologies' solo analyst is for revenues of AU$20m in 2021 which - if met - would reflect a solid 15% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching AU$0.044 per share. Yet before this consensus update, the analyst had been forecasting revenues of AU$23m and losses of AU$0.028 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Mach7 Technologies

The consensus price target fell 7.4% to AU$1.56, implicitly signalling that lower earnings per share are a leading indicator for Mach7 Technologies' valuation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analyst is definitely expecting Mach7 Technologies' growth to accelerate, with the forecast 33% annualised growth to the end of 2021 ranking favourably alongside historical growth of 25% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 30% annually. Mach7 Technologies is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

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 Mach7 Technologies. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Mach7 Technologies going out as far as 2023, and you can see them free on our platform here.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.