Consun Pharmaceutical Group Limited (HKG:1681) just released its latest annual report and things are not looking great. It looks like quite a negative result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of CN¥1.7b missed by 15%, and statutory earnings per share of CN¥0.093 fell short of forecasts by 84%. 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. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Consun Pharmaceutical Group’s three analysts is for revenues of CN¥1.81b in 2020, which would reflect a reasonable 4.6% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 495% to CN¥0.56. In the lead-up to this report, the analysts had been modelling revenues of CN¥2.25b and earnings per share (EPS) of CN¥0.67 in 2020. Indeed, we can see that the analysts are a lot more bearish about Consun Pharmaceutical Group’s prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 15% to CN¥6.54, with the weaker earnings outlook clearly leading valuation estimates. 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. There are some variant perceptions on Consun Pharmaceutical Group, with the most bullish analyst valuing it at CN¥7.31 and the most bearish at CN¥5.49 per share. This is a very narrow spread of estimates, implying either that Consun Pharmaceutical Group is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
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 pretty clear that there is an expectation that Consun Pharmaceutical Group’s revenue growth will slow down substantially, with revenues next year expected to grow 4.6%, compared to a historical growth rate of 20% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it seems obvious that Consun Pharmaceutical Group is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse 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 said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Consun Pharmaceutical Group going out to 2022, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 4 warning signs for Consun Pharmaceutical Group that you need to be mindful of.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.