Things Look Grim For Zealand Pharma A/S (CPH:ZEAL) After Today's Downgrade

Today is shaping up negative for Zealand Pharma A/S (CPH:ZEAL) 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 the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Zealand Pharma's eight analysts is for revenues of kr.541m in 2024, which would reflect a major 47% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting kr.11.29 per share. However, before this estimates update, the consensus had been expecting revenues of kr.611m and kr.9.68 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.

Check out our latest analysis for Zealand Pharma

There was no major change to the consensus price target of kr.1,015, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Zealand Pharma's rate of growth is expected to accelerate meaningfully, with the forecast 116% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 21% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 20% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Zealand Pharma to grow faster than the wider industry.

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, although our data indicates revenues are expected to perform better 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.

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

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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.