Market forces rained on the parade of Aesthetic Medical International Holdings Group Limited (NASDAQ:AIH) 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 most recent consensus for Aesthetic Medical International Holdings Group from its one analyst is for revenues of CN¥900m in 2020 which, if met, would be an okay 3.6% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 58% to CN¥3.75 in the same period. Previously, the analyst had been modelling revenues of CN¥1.3b and earnings per share (EPS) of CN¥5.67 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.
The consensus price target fell 8.3% to US$11.00, with the weaker earnings outlook clearly leading analyst valuation estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Aesthetic Medical International Holdings Group's revenue growth will slow down substantially, with revenues next year expected to grow 3.6%, compared to a historical growth rate of 12% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.8% next year. Factoring in the forecast slowdown in growth, it seems obvious that Aesthetic Medical International Holdings Group is also expected to grow slower than other industry participants.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Aesthetic Medical International Holdings Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Aesthetic Medical International Holdings Group.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Aesthetic Medical International Holdings Group going out as far as 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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