CanSino Biologics Inc. (HKG:6185) Analysts Just Slashed Next Year's Revenue Estimates By 15%

Market forces rained on the parade of CanSino Biologics Inc. (HKG:6185) shareholders today, when the analysts downgraded their forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Shares are up 9.9% to HK$168 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the five analysts covering CanSino Biologics are now predicting revenues of CN¥15b in 2022. If met, this would reflect a huge 369% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 513% to CN¥27.57. Before this latest update, the analysts had been forecasting revenues of CN¥17b and earnings per share (EPS) of CN¥29.89 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

Check out our latest analysis for CanSino Biologics

It'll come as no surprise then, to learn that the analysts have cut their price target 8.7% to CN¥259. 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. The most optimistic CanSino Biologics analyst has a price target of CN¥420 per share, while the most pessimistic values it at CN¥206. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CanSino Biologics' past performance and to peers in the same industry. It's clear from the latest estimates that CanSino Biologics' rate of growth is expected to accelerate meaningfully, with the forecast 244% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 96% p.a. 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 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that CanSino Biologics is expected to grow much faster than its industry.

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 CanSino Biologics. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on CanSino Biologics after today.

That said, the analysts might have good reason to be negative on CanSino Biologics, given concerns around earnings quality. For more information, you can click here to discover this and the 1 other warning sign 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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