Need To Know: Analysts Just Made A Substantial Cut To Their MediWound Ltd. (NASDAQ:MDWD) Estimates

Today is shaping up negative for MediWound Ltd. (NASDAQ:MDWD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about MediWound recently, with the stock price up a notable 14% to US$1.90 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After the downgrade, the consensus from MediWound's six analysts is for revenues of US$18m in 2022, which would reflect a definite 18% decline in sales compared to the last year of performance. Per-share losses are expected to creep up to US$0.44. Yet before this consensus update, the analysts had been forecasting revenues of US$21m and losses of US$0.37 per share in 2022. 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 MediWound

Analysts lifted their price target 8.8% to US$6.80, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on MediWound, with the most bullish analyst valuing it at US$8.00 and the most bearish at US$6.00 per share. This is a very narrow spread of estimates, implying either that MediWound is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the MediWound'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 32% by the end of 2022. This indicates a significant reduction from annual growth of 38% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MediWound is expected to lag 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 MediWound. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that MediWound's revenues are expected to grow slower than the wider market. 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 MediWound.

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 MediWound analysts - going out to 2024, and you can see them 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.