The Consensus EPS Estimates For Althea Group Holdings Limited (ASX:AGH) Just Fell A Lot

The latest analyst coverage could presage a bad day for Althea Group Holdings Limited (ASX:AGH), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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.

After the downgrade, the solitary analyst covering Althea Group Holdings is now predicting revenues of AU$25m in 2022. If met, this would reflect a substantial 58% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to AU$0.04. However, before this estimates update, the consensus had been expecting revenues of AU$28m and AU$0.03 per share in losses. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Althea Group Holdings

The consensus price target fell 31% to AU$0.57, implicitly signalling that lower earnings per share are a leading indicator for Althea Group Holdings' valuation.

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. We would highlight that Althea Group Holdings' revenue growth is expected to slow, with the forecast 58% annualised growth rate until the end of 2022 being well below the historical 82% p.a. growth over the last three years. Compare this to the 38 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 51% per year. So it's pretty clear that, while Althea Group Holdings' 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 the analyst 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.

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 Althea Group Holdings' business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 4 other concerns we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.