One Saudi Pharmaceutical Industries and Medical Appliances Corporation (TADAWUL:2070) Analyst Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of Saudi Pharmaceutical Industries and Medical Appliances Corporation (TADAWUL:2070) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Saudi Pharmaceutical Industries and Medical Appliances' one analyst is for revenues of ر.س1.6b in 2022, which would reflect a meaningful 11% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 191% to ر.س0.72. Previously, the analyst had been modelling revenues of ر.س2.1b and earnings per share (EPS) of ر.س1.89 in 2022. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for Saudi Pharmaceutical Industries and Medical Appliances

What's most unexpected is that the consensus price target rose 5.5% to ر.س38.25, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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. The most optimistic Saudi Pharmaceutical Industries and Medical Appliances analyst has a price target of ر.س41.00 per share, while the most pessimistic values it at ر.س35.50. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

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 analyst is definitely expecting Saudi Pharmaceutical Industries and Medical Appliances' growth to accelerate, with the forecast 11% annualised growth to the end of 2022 ranking favourably alongside historical growth of 3.5% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Saudi Pharmaceutical Industries and Medical Appliances is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Saudi Pharmaceutical Industries and Medical Appliances.

There might be good reason for analyst bearishness towards Saudi Pharmaceutical Industries and Medical Appliances, like the risk of cutting its dividend. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.

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.