Time To Worry? Analysts Just Downgraded Their Bubs Australia Limited (ASX:BUB) Outlook

The analysts covering Bubs Australia Limited (ASX:BUB) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the latest consensus from Bubs Australia's five analysts is for revenues of AU$134m in 2023, which would reflect a major 50% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of AU$135m in 2023. Overall it looks like Bubs Australia is performing in line with analyst expectations, given the analysts have updated their numbers and there's been no real change to this year's forecast following these updates.

Our analysis indicates that BUB is potentially undervalued!

We'd point out that there was no major changes to their price target of AU$0.56, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Bubs Australia at AU$0.68 per share, while the most bearish prices it at AU$0.30. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Bubs Australia's rate of growth is expected to accelerate meaningfully, with the forecast 50% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 32% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.1% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Bubs Australia is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts reconfirmed their revenue estimates for this year, suggesting that the business is performing in line with market expectations. Analysts also expect revenues to grow faster than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Bubs Australia going forwards.

Of course, this isn't the full story. We have estimates for Bubs Australia from its five analysts out until 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. 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.