Today is shaping up negative for Kangji Medical Holdings Limited (HKG:9997) 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 the analysts have soured majorly on the business.
After the downgrade, the three analysts covering Kangji Medical Holdings are now predicting revenues of CN¥670m in 2021. If met, this would reflect a major 31% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 24% to CN¥0.33. Previously, the analysts had been modelling revenues of CN¥840m and earnings per share (EPS) of CN¥0.40 in 2021. Indeed, we can see that the analysts are a lot more bearish about Kangji Medical Holdings' prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 7.3% to CN¥21.49. 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. Currently, the most bullish analyst values Kangji Medical Holdings at CN¥36.20 per share, while the most bearish prices it at CN¥9.40. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on 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. The analysts are definitely expecting Kangji Medical Holdings' growth to accelerate, with the forecast 31% annualised growth to the end of 2021 ranking favourably alongside historical growth of 22% per annum over the past three years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 27% per year. Kangji Medical Holdings is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Kangji Medical Holdings. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Kangji Medical Holdings going out to 2023, and you can see them free on our platform here.
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