Shorn Like A Sheep: One Analyst Just Shaved Their Yestar Healthcare Holdings Company Limited (HKG:2393) Forecasts Dramatically
One thing we could say about the covering analyst on Yestar Healthcare Holdings Company Limited (HKG:2393) - 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) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 7.6% to CN¥1.27 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the downgrade, the current consensus from Yestar Healthcare Holdings' single analyst is for revenues of CN¥5.0b in 2020 which - if met - would reflect a credible 2.1% increase on its sales over the past 12 months. Statutory earnings per share are presumed to surge 27% to CN¥0.11. Before this latest update, the analyst had been forecasting revenues of CN¥5.9b and earnings per share (EPS) of CN¥0.15 in 2020. Indeed, we can see that the analyst is a lot more bearish about Yestar Healthcare Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Yestar Healthcare Holdings
The analyst made no major changes to their price target of CN¥2.11, suggesting the downgrades are not expected to have a long-term impact on Yestar Healthcare Holdings'valuation. 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 Yestar Healthcare Holdings at CN¥2.99 per share, while the most bearish prices it at CN¥1.37. This is a fairly broad spread of estimates, suggesting that the analyst is forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Yestar Healthcare Holdings' revenue growth is expected to slow, with forecast 2.1% 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 20% next year. Factoring in the forecast slowdown in growth, it seems obvious that Yestar Healthcare Holdings is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Yestar Healthcare Holdings after the downgrade.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. You can learn more about our debt analysis for free on our platform here.
We also provide an overview of the Yestar Healthcare Holdings Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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