Need To Know: Analysts Just Made A Substantial Cut To Their Ascletis Pharma Inc. (HKG:1672) Estimates

Market forces rained on the parade of Ascletis Pharma Inc. (HKG:1672) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Ascletis Pharma from its twin analysts is for revenues of CN¥130m in 2022 which, if met, would be a sizeable 66% increase on its sales over the past 12 months. Losses are supposed to balloon 30% to CN¥0.21 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥149m and losses of CN¥0.12 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Ascletis Pharma

There was no major change to the consensus price target of CN¥2.04, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Ascletis Pharma, with the most bullish analyst valuing it at CN¥2.39 and the most bearish at CN¥2.29 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Ascletis Pharma is an easy business to forecast or the underlying assumptions are obvious.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that Ascletis Pharma's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 66% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 36% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 39% annually. Not only are Ascletis Pharma's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Ascletis Pharma. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Ascletis Pharma.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2024, which can be seen for 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.