Bubs Australia Limited (ASX:BUB) Analysts Just Slashed This Year's Estimates

One thing we could say about the analysts on Bubs Australia Limited (ASX:BUB) - 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.

After the downgrade, the three analysts covering Bubs Australia are now predicting revenues of AU$49m in 2021. If met, this would reflect an okay 7.3% improvement in sales compared to the last 12 months. Losses are expected to increase slightly, to AU$0.024 per share. However, before this estimates update, the consensus had been expecting revenues of AU$57m and AU$0.011 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Bubs Australia

The consensus price target fell 10% to AU$0.59, implicitly signalling that lower earnings per share are a leading indicator for Bubs Australia's valuation. 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. The most optimistic Bubs Australia analyst has a price target of AU$0.75 per share, while the most pessimistic values it at AU$0.51. 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.

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. We would highlight that Bubs Australia's revenue growth is expected to slow, with the forecast 7.3% annualised growth rate until the end of 2021 being well below the historical 43% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.7% annually. So it's pretty clear that, while Bubs Australia's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Bubs Australia going out to 2025, 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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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.
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