Today is shaping up negative for Yatsen Holding Limited (NYSE:YSG) 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 analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the four analysts covering Yatsen Holding, is for revenues of CN¥4.9b in 2022, which would reflect an uneasy 15% reduction in Yatsen Holding's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 35% to CN¥1.60. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥6.2b and losses of CN¥0.93 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 23% to CN¥12.58, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Yatsen Holding, with the most bullish analyst valuing it at CN¥3.51 and the most bearish at CN¥0.70 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Yatsen Holding's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 15% by the end of 2022. This indicates a significant reduction from annual growth of 43% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.1% annually for the foreseeable future. It's pretty clear that Yatsen Holding's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Yatsen Holding. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Yatsen Holding.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Yatsen Holding 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.
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.