One thing we could say about the covering analyst on Hello Pal International Inc. (CSE:HP) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the latest consensus from Hello Pal International's lone analyst is for revenues of CA$28m in 2022, which would reflect a meaningful 13% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 42% to CA$0.02. Yet prior to the latest estimates, the analyst had been forecasting revenues of CA$36m and losses of CA$0.01 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 17% to CA$1.56, implicitly signalling that lower earnings per share are a leading indicator for Hello Pal International's valuation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Hello Pal International's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 13% growth on an annualised basis. This is compared to a historical growth rate of 92% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 14% annually. So it's pretty clear that, while Hello Pal International's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for this year. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2023, 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.
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.
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