Today is shaping up negative for Waterdrop Inc. (NYSE:WDH) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the latest consensus from Waterdrop's five analysts is for revenues of CN¥4.7b in 2022, which would reflect a sizeable 38% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CN¥5.5b in 2022. It looks like forecasts have become a fair bit less optimistic on Waterdrop, given the substantial drop in revenue estimates.
The consensus price target fell 24% to CN¥30.47, with the analysts clearly less optimistic about Waterdrop's valuation following this update. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Waterdrop at CN¥8.79 per share, while the most bearish prices it at CN¥1.76. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Waterdrop's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 30% growth on an annualised basis. This is compared to a historical growth rate of 50% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.9% annually. Even after the forecast slowdown in growth, it seems obvious that Waterdrop is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for next year. They're also forecasting more rapid revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Waterdrop after today.
Want to learn more? At least one of Waterdrop's five analysts has provided estimates out to 2024, which can be seen for 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.
What are the risks and opportunities for Waterdrop?
Price-To-Earnings ratio (9.7x) is below the US market (15.6x)
Earnings are forecast to grow 17.48% per year
Became profitable this year
No risks detected for WDH from our risks checks.
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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.
Waterdrop Inc., through its subsidiaries, provides online insurance brokerage services to match and connect users with related insurance products underwritten by insurance companies in the People’s Republic of China.
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