Analysts Are More Bearish On OrganiGram Holdings Inc. (TSE:OGI) Than They Used To Be

Market forces rained on the parade of OrganiGram Holdings Inc. (TSE:OGI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from OrganiGram Holdings' 16 analysts is for revenues of CA$93m in 2021, which would reflect a decent 15% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 72% to CA$0.26. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$108m and losses of CA$0.089 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.

See our latest analysis for OrganiGram Holdings

The consensus price target fell 6.8% to CA$2.47, implicitly signalling that lower earnings per share are a leading indicator for OrganiGram Holdings' 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 OrganiGram Holdings analyst has a price target of CA$3.89 per share, while the most pessimistic values it at CA$1.75. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. We would highlight that OrganiGram Holdings' revenue growth is expected to slow, with forecast 15% increase next year well below the historical 61% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 32% per year. Factoring in the forecast slowdown in growth, it seems obvious that OrganiGram Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of OrganiGram Holdings.

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 OrganiGram Holdings analysts - going out to 2025, 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. 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.
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