One thing we could say about the analysts on Consun Pharmaceutical Group Limited (HKG:1681) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the current consensus from Consun Pharmaceutical Group's three analysts is for revenues of CN¥1.8b in 2020 which - if met - would reflect a credible 4.6% increase on its sales over the past 12 months. Per-share earnings are expected to jump 495% to CN¥0.56. Before this latest update, the analysts had been forecasting revenues of CN¥2.3b and earnings per share (EPS) of CN¥0.67 in 2020. Indeed, we can see that the analysts are a lot more bearish about Consun Pharmaceutical Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 16% to CN¥6.39, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Consun Pharmaceutical Group analyst has a price target of CN¥7.31 per share, while the most pessimistic values it at CN¥5.49. This is a very narrow spread of estimates, implying either that Consun Pharmaceutical Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Consun Pharmaceutical Group's revenue growth is expected to slow, with forecast 4.6% increase next year well below the historical 20% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 17% next year. Factoring in the forecast slowdown in growth, it seems obvious that Consun Pharmaceutical Group is also expected to grow slower than other industry participants.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Consun Pharmaceutical Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Consun Pharmaceutical Group's revenues are expected to grow 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 Consun Pharmaceutical Group.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Consun Pharmaceutical Group going out to 2022, 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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