Stock Analysis

News Flash: Analysts Just Made A Substantial Upgrade To Their New Horizon Health Limited (HKG:6606) Forecasts

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SEHK:6606
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Shareholders in New Horizon Health Limited (HKG:6606) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The stock price has risen 4.9% to HK$33.95 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

Following the upgrade, the most recent consensus for New Horizon Health from its four analysts is for revenues of CN¥1.4b in 2023 which, if met, would be a huge 89% increase on its sales over the past 12 months. Losses are forecast to narrow 2.1% to CN¥0.17 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥1.2b and losses of CN¥0.67 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

Check out our latest analysis for New Horizon Health

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SEHK:6606 Earnings and Revenue Growth March 19th 2023

Despite these upgrades, the analysts have not made any major changes to their price target of CN¥50.84, implying that their latest estimates don't have a long term impact on what they think the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on New Horizon Health, with the most bullish analyst valuing it at CN¥67.04 and the most bearish at CN¥50.20 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the New Horizon Health's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of New Horizon Health'shistorical trends, as the 89% annualised revenue growth to the end of 2023 is roughly in line with the 91% annual revenue growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 14% per year. So it's pretty clear that New Horizon Health is forecast to grow substantially faster than its industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting New Horizon Health is moving incrementally towards profitability. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at New Horizon Health.

It's great to see the analysts upgrading their estimates, but the biggest highlight to us is that the business is expected to become profitable in the foreseeable future. For more information, you can click through to our free platform to learn more about these forecasts.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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Find out whether New Horizon Health is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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