Things Look Grim For CanSino Biologics Inc. (HKG:6185) After Today's Downgrade

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. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the consensus from five analysts covering CanSino Biologics is for revenues of CN¥1.4b in 2022, implying a substantial 50% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 78% to CN¥0.89 in the same period. Previously, the analysts had been modelling revenues of CN¥2.4b and earnings per share (EPS) of CN¥0.93 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a sizeable cut to revenue estimates and a small dip in EPS estimates to boot.

Check out our latest analysis for CanSino Biologics

The consensus price target fell 25% to CN¥112, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CanSino Biologics at CN¥196 per share, while the most bearish prices it at CN¥87.90. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. We would highlight that sales are expected to reverse, with a forecast 61% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 116% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - CanSino Biologics is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that CanSino Biologics' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of CanSino Biologics.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple CanSino Biologics analysts - going out to 2024, and you can see them 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.

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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.