Time To Worry? Analysts Are Downgrading Their Novogene Co., Ltd. (SHSE:688315) Outlook

Today is shaping up negative for Novogene Co., Ltd. (SHSE:688315) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.

After this downgrade, Novogene's three analysts are now forecasting revenues of CN¥2.4b in 2024. This would be a notable 16% improvement in sales compared to the last 12 months. Per-share earnings are expected to ascend 16% to CN¥0.51. Prior to this update, the analysts had been forecasting revenues of CN¥2.8b and earnings per share (EPS) of CN¥0.68 in 2024. Indeed, we can see that the analysts are a lot more bearish about Novogene's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Novogene

It'll come as no surprise then, to learn that the analysts have cut their price target 18% to CN¥24.82.

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. It's clear from the latest estimates that Novogene's rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 10% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Novogene is expected to grow at about the same rate as 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 Novogene. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Novogene.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Novogene analysts - going out to 2026, 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.

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.