Analysts Are More Bearish On AK Medical Holdings Limited (HKG:1789) Than They Used To Be

The latest analyst coverage could presage a bad day for AK Medical Holdings Limited (HKG:1789), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, AK Medical Holdings' four analysts currently expect revenues in 2021 to be CN¥1.0b, approximately in line with the last 12 months. Statutory earnings per share are supposed to decrease 7.0% to CN¥0.27 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥1.2b and earnings per share (EPS) of CN¥0.33 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.

View our latest analysis for AK Medical Holdings

Despite the cuts to forecast earnings, there was no real change to the CN¥10.35 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on AK Medical Holdings, with the most bullish analyst valuing it at CN¥16.46 and the most bearish at CN¥8.77 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. We would highlight that sales are expected to reverse, with a forecast 1.0% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 32% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 24% per year. It's pretty clear that AK 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 analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that AK Medical Holdings' 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 AK Medical Holdings after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with AK Medical Holdings, including concerns around earnings quality. Learn more, and discover the 1 other warning sign we've identified, for free on our platform here.

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