Time To Worry? Analysts Are Downgrading Their Venus Medtech (Hangzhou) Inc. (HKG:2500) Outlook

Today is shaping up negative for Venus Medtech (Hangzhou) Inc. (HKG:2500) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the most recent consensus for Venus Medtech (Hangzhou) from its seven analysts is for revenues of CN¥624m in 2023 which, if met, would be a major 54% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 63% to CN¥0.91. However, before this estimates update, the consensus had been expecting revenues of CN¥716m and CN¥0.60 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 Venus Medtech (Hangzhou)

The consensus price target fell 14% to CN¥14.88, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Venus Medtech (Hangzhou), with the most bullish analyst valuing it at CN¥22.63 and the most bearish at CN¥14.02 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. The analysts are definitely expecting Venus Medtech (Hangzhou)'s growth to accelerate, with the forecast 54% annualised growth to the end of 2023 ranking favourably alongside historical growth of 28% 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 27% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Venus Medtech (Hangzhou) is expected to grow much faster than its 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. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Venus Medtech (Hangzhou).

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Venus Medtech (Hangzhou) 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. 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.