Downgrade: Here's How Analysts See Zealand Pharma A/S (CPH:ZEAL) Performing In The Near Term

One thing we could say about the analysts on Zealand Pharma A/S (CPH:ZEAL) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the consensus from eight analysts covering Zealand Pharma is for revenues of kr.281m in 2021, implying a substantial 28% decline in sales compared to the last 12 months. Per-share losses are expected to see a sharp uptick, reaching kr.25.95. Yet before this consensus update, the analysts had been forecasting revenues of kr.353m and losses of kr.22.55 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.

View our latest analysis for Zealand Pharma

The consensus price target was broadly unchanged at kr.255, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Zealand Pharma analyst has a price target of kr.310 per share, while the most pessimistic values it at kr.171. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. Over the past five years, revenues have declined around 0.07% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 48% decline in revenue until the end of 2021. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 23% annually. So while a broad number of companies are forecast to grow, unfortunately Zealand Pharma is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Zealand Pharma. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Zealand Pharma's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Zealand Pharma.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Zealand Pharma going out to 2023, 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. 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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