Downgrade: Here's How Analysts See PharmaEssentia Corporation (GTSM:6446) Performing In The Near Term

Market forces rained on the parade of PharmaEssentia Corporation (GTSM:6446) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the three analysts covering PharmaEssentia are now predicting revenues of NT$1.3b in 2021. If met, this would reflect a major 127% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 16% from last year to NT$6.75. Yet prior to the latest estimates, the analysts had been forecasting revenues of NT$1.8b and losses of NT$5.36 per share in 2021. 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.

View our latest analysis for PharmaEssentia

Analysts lifted their price target 7.8% to NT$110, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. Currently, the most bullish analyst values PharmaEssentia at NT$137 per share, while the most bearish prices it at NT$90.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. It's clear from the latest estimates that PharmaEssentia's rate of growth is expected to accelerate meaningfully, with the forecast 127% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 79% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 70% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect PharmaEssentia to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple PharmaEssentia analysts - going out to 2022, 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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