Market forces rained on the parade of Bubs Australia Limited (ASX:BUB) shareholders today, when the analysts downgraded their forecasts for this year. 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 Bubs Australia's five analysts is for revenues of AU$134m in 2023, which would reflect a huge 50% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing AU$135m of revenue in 2023. From what we can see, it looks like Bubs Australia is performing in line with analyst expectations. The the analysts we track have all updated their numbers, and there were no major changes to their forecasts for this year.
There was no particular change to the consensus price target of AU$0.56, with Bubs Australia's latest outlook seemingly not enough to result in a change of valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Bubs Australia at AU$0.68 per share, while the most bearish prices it at AU$0.30. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Bubs Australia's rate of growth is expected to accelerate meaningfully, with the forecast 50% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 32% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.1% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Bubs Australia to grow faster than the wider industry.
The Bottom Line
The clear take away from these updates is that analysts made no change to their revenue estimates for this year, with the business apparently performing in line with their models. Analysts also expect revenues to grow faster than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Bubs Australia after today.
Of course, this isn't the full story. At least one of Bubs Australia's five analysts has provided estimates out to 2025, which can be seen for 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.
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