The analyst covering Vincent Medical Holdings Limited (HKG:1612) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the consensus from lone analyst covering Vincent Medical Holdings is for revenues of HK$975m in 2021, implying a considerable 16% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to plunge 40% to HK$0.20 in the same period. Prior to this update, the analyst had been forecasting revenues of HK$1.1b and earnings per share (EPS) of HK$0.21 in 2021. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a measurable cut to revenues and some minor tweaks to earnings numbers.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2021. This indicates a significant reduction from annual growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 28% annually for the foreseeable future. It's pretty clear that Vincent Medical Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analyst reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Vincent Medical Holdings after today.
That said, the analyst might have good reason to be negative on Vincent Medical Holdings, given dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs we've identified, for 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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