Some Zealand Pharma A/S (CPH:ZEAL) Analysts Just Made A Major Cut To Next Year's Estimates

The latest analyst coverage could presage a bad day for Zealand Pharma A/S (CPH:ZEAL), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, Zealand Pharma's nine analysts are now forecasting revenues of kr.341m in 2021. This would be a decent 13% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching kr.23.91 per share. However, before this estimates update, the consensus had been expecting revenues of kr.386m and kr.19.51 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Zealand Pharma

There was no major change to the consensus price target of kr.264, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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.357 per share, while the most pessimistic values it at kr.171. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Zealand Pharma's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 12% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 21% annually for the foreseeable future. So although Zealand Pharma's revenue growth is expected to improve, it is still expected to grow slower than 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. 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 Zealand Pharma after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Zealand Pharma 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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