Heidelberg Pharma AG (ETR:HPHA) Analysts Are More Bearish Than They Used To Be

The analysts covering Heidelberg Pharma AG (ETR:HPHA) 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) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the three analysts covering Heidelberg Pharma are now predicting revenues of €9.6m in 2021. If met, this would reflect a notable 8.7% improvement in sales compared to the last 12 months. Losses are supposed to balloon 86% to €1.08 per share. However, before this estimates update, the consensus had been expecting revenues of €11m and €0.76 per share in losses. 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.

Check out our latest analysis for Heidelberg Pharma

There was no major change to the consensus price target of €9.15, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. Currently, the most bullish analyst values Heidelberg Pharma at €9.90 per share, while the most bearish prices it at €8.15. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Heidelberg Pharma's past performance and to peers in the same industry. We would highlight that Heidelberg Pharma's revenue growth is expected to slow, with the forecast 8.7% annualised growth rate until the end of 2021 being well below the historical 35% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 25% annually. Factoring in the forecast slowdown in growth, it seems obvious that Heidelberg Pharma 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Heidelberg Pharma's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Heidelberg Pharma after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Heidelberg Pharma analysts - going out to 2025, 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.

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