Time To Worry? Analysts Are Downgrading Their HLS Therapeutics Inc. (TSE:HLS) Outlook

Today is shaping up negative for HLS Therapeutics Inc. (TSE:HLS) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the most recent consensus for HLS Therapeutics from its five analysts is for revenues of US$83m in 2022 which, if met, would be a major 39% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 81% to US$0.075. However, before this estimates update, the consensus had been expecting revenues of US$106m and US$0.025 per share in losses. 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.

View our latest analysis for HLS Therapeutics

The consensus price target fell 5.4% to US$22.55, implicitly signalling that lower earnings per share are a leading indicator for HLS Therapeutics' 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 HLS Therapeutics analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$25.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the HLS Therapeutics' past performance and to peers in the same industry. For example, we noticed that HLS Therapeutics' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 39% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 4.1% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 14% annually. So it looks like HLS Therapeutics is expected to grow faster than its competitors, at least for a while.

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 HLS Therapeutics. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of HLS Therapeutics.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for HLS Therapeutics going out to 2024, and you can see them free on our platform here.

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.

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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.