The analysts covering Guobang Pharma Ltd. (SHSE:605507) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. At CN¥18.61, shares are up 4.6% in the past 7 days. 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 Guobang Pharma's dual analysts is for revenues of CN¥5.9b in 2024 which - if met - would reflect a notable 12% increase on its sales over the past 12 months. Per-share earnings are expected to grow 16% to CN¥1.29. Prior to this update, the analysts had been forecasting revenues of CN¥7.1b and earnings per share (EPS) of CN¥1.77 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
Analysts made no major changes to their price target of CN¥23.00, suggesting the downgrades are not expected to have a long-term impact on Guobang Pharma's valuation.
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 can infer from the latest estimates that forecasts expect a continuation of Guobang Pharma'shistorical trends, as the 12% annualised revenue growth to the end of 2024 is roughly in line with the 10% annual revenue growth over the past three years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 13% per year. So although Guobang Pharma is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
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 Guobang Pharma. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Guobang Pharma.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2026, 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 backed by insiders.
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