Downgrade: Here's How Analysts See HLS Therapeutics Inc. (TSE:HLS) Performing In The Near Term

The latest analyst coverage could presage a bad day for HLS Therapeutics Inc. (TSE:HLS), 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.

Following the downgrade, the latest consensus from HLS Therapeutics' five analysts is for revenues of US$102m in 2023, which would reflect a substantial 67% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 93% to US$0.04. Before this latest update, the analysts had been forecasting revenues of US$120m and earnings per share (EPS) of US$0.21 in 2023. So we can see that the consensus has become notably more bearish on HLS Therapeutics' outlook with these numbers, making a measurable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

Our analysis indicates that HLS is potentially undervalued!

The consensus price target fell 6.4% to US$18.15, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic HLS Therapeutics analyst has a price target of US$32.00 per share, while the most pessimistic values it at US$23.19. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. For example, we noticed that HLS Therapeutics' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 51% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 4.6% 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 19% annually. Not only are HLS Therapeutics' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting HLS Therapeutics to become unprofitable next year. 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. 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.

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.

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.