Medical Developments International Limited (ASX:MVP) Analysts Just Slashed This Year's Estimates

The latest analyst coverage could presage a bad day for Medical Developments International Limited (ASX:MVP), with the analysts 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the three analysts covering Medical Developments International are now predicting revenues of AU$26m in 2021. If met, this would reflect an okay 7.5% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching AU$0.052 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$29m and losses of AU$0.018 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Medical Developments International

The consensus price target was broadly unchanged at AU$7.07, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Medical Developments International analyst has a price target of AU$7.10 per share, while the most pessimistic values it at AU$7.03. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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. The analysts are definitely expecting Medical Developments International's growth to accelerate, with the forecast 16% annualised growth to the end of 2021 ranking favourably alongside historical growth of 10% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 38% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Medical Developments International is expected to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Medical Developments International's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Medical Developments International after the downgrade.

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 Medical Developments International analysts - going out to 2023, 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.

If you’re looking to trade Medical Developments International, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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