Cyclopharm Limited's (ASX:CYC) Analyst Just Slashed This Year's Estimates

One thing we could say about the covering analyst on Cyclopharm Limited (ASX:CYC) - 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) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the lone analyst covering Cyclopharm, is for revenues of AU$17m in 2021, which would reflect a discernible 6.7% reduction in Cyclopharm's sales over the past 12 months. Losses are expected to increase substantially, hitting AU$0.088 per share. However, before this estimates update, the consensus had been expecting revenues of AU$19m and AU$0.071 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Cyclopharm

The consensus price target fell 51% to US$1.44, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 6.7% by the end of 2021. This indicates a significant reduction from annual growth of 4.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. It's pretty clear that Cyclopharm's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Cyclopharm. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Cyclopharm's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Cyclopharm.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Cyclopharm's business, like a short cash runway. Learn more, and discover the 3 other concerns we've identified, for 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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