Analysts Are More Bearish On CanSino Biologics Inc. (HKG:6185) Than They Used To Be

Today is shaping up negative for CanSino Biologics Inc. (HKG:6185) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.

After the downgrade, the five analysts covering CanSino Biologics are now predicting revenues of CN¥1.2b in 2023. If met, this would reflect a huge 188% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 48% to CN¥3.71 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥1.7b and losses of CN¥2.22 per share in 2023. 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.

View our latest analysis for CanSino Biologics

The consensus price target fell 16% to CN¥80.89, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 CanSino Biologics, with the most bullish analyst valuing it at CN¥186 and the most bearish at CN¥32.34 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. It's clear from the latest estimates that CanSino Biologics' rate of growth is expected to accelerate meaningfully, with the forecast 188% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 23% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect CanSino Biologics 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 CanSino Biologics. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with CanSino Biologics' financials, such as the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other flag we've identified.

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