Time To Worry? Analysts Are Downgrading Their Microbix Biosystems Inc. (TSE:MBX) Outlook

The analysts covering Microbix Biosystems Inc. (TSE:MBX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. 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 current consensus from Microbix Biosystems' two analysts is for revenues of CA$23m in 2023 which - if met - would reflect a notable 18% increase on its sales over the past 12 months. Per-share earnings are expected to surge 75% to CA$0.022. Prior to this update, the analysts had been forecasting revenues of CA$29m and earnings per share (EPS) of CA$0.044 in 2023. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.

Check out our latest analysis for Microbix Biosystems

It'll come as no surprise then, to learn that the analysts have cut their price target 20% to CA$0.90. 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 Microbix Biosystems analyst has a price target of CA$1.00 per share, while the most pessimistic values it at CA$0.80. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Microbix Biosystems' growth to accelerate, with the forecast 18% annualised growth to the end of 2023 ranking favourably alongside historical growth of 13% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 71% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Microbix Biosystems is expected to grow slower than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Microbix Biosystems. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Microbix Biosystems' 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 Microbix Biosystems.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2024, which can be seen 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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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.