One thing we could say about the analysts on Consun Pharmaceutical Group Limited (HKG:1681) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Investors however, have been notably more optimistic about Consun Pharmaceutical Group recently, with the stock price up a worthy 15% to CN¥3.38 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
After this downgrade, Consun Pharmaceutical Group’s three analysts are now forecasting revenues of CN¥1.8b in 2020. This would be an okay 4.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 495% to CN¥0.56. Before this latest update, the analysts had been forecasting revenues of CN¥2.3b 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, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
It’ll come as no surprise then, to learn that the analysts have cut their price target 16% to CN¥6.39. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Consun Pharmaceutical Group analyst has a price target of CN¥7.31 per share, while the most pessimistic values it at CN¥5.49. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that the analysts have a clear view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. 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. So it’s pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Consun Pharmaceutical Group.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we’d understand if readers now felt a bit wary of Consun Pharmaceutical Group.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Consun Pharmaceutical Group analysts – going out to 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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