The analysts might have been a bit too bullish on urban-gro, Inc. (NASDAQ:UGRO), given that the company fell short of expectations when it released its third-quarter results last week. It was not a great statutory result, with revenues coming in 58% lower than the analysts predicted. Unsurprisingly, earnings also fell seriously short of forecasts, turning into a per-share loss of US$0.30. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for urban-gro

Taking into account the latest results, the consensus forecast from urban-gro's three analysts is for revenues of US$96.3m in 2025. This reflects a sizeable 61% improvement in revenue compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 71% to US$0.30. Before this latest report, the consensus had been expecting revenues of US$105.2m and US$0.24 per share in losses. While next year's revenue estimates dropped there was also a very substantial increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

The average price target fell 32% to US$3.57, implicitly signalling that lower earnings per share are a leading indicator for urban-gro'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. There are some variant perceptions on urban-gro, with the most bullish analyst valuing it at US$4.70 and the most bearish at US$3.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that urban-gro's rate of growth is expected to accelerate meaningfully, with the forecast 46% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 23% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that urban-gro is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on urban-gro. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple urban-gro analysts - going out to 2027, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for urban-gro (1 is concerning!) that you need to take into consideration.

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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.