Downgrade: Here's How Analysts See Transgene SA (EPA:TNG) Performing In The Near Term

One thing we could say about the analysts on Transgene SA (EPA:TNG) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the current consensus from Transgene's three analysts is for revenues of €14m in 2023 which - if met - would reflect a sizeable 35% increase on its sales over the past 12 months. Losses are supposed to balloon 27% to €0.42 per share. Yet before this consensus update, the analysts had been forecasting revenues of €16m and losses of €0.37 per share in 2023. 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 Transgene

The consensus price target was broadly unchanged at €3.93, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Transgene analyst has a price target of €4.30 per share, while the most pessimistic values it at €3.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Transgene is an easy business to forecast or the underlying assumptions are obvious.

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. The analysts are definitely expecting Transgene's growth to accelerate, with the forecast 35% annualised growth to the end of 2023 ranking favourably alongside historical growth of 15% per annum 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 26% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Transgene is expected to grow much faster than its 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 Transgene. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Transgene.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Transgene 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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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.