The latest analyst coverage could presage a bad day for China Shineway Pharmaceutical Group Limited (HKG:2877), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 China Shineway Pharmaceutical Group's four analysts is for revenues of CN¥2.8b in 2020, which would reflect a satisfactory 4.2% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 22% to CN¥0.79. Prior to this update, the analysts had been forecasting revenues of CN¥3.3b and earnings per share (EPS) of CN¥0.80 in 2020. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.
The consensus price target was reduced 12% to CN¥8.07, with the lower revenue forecasts indicating negative sentiment towards China Shineway Pharmaceutical Group, even though earnings forecasts were unchanged. 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. The most optimistic China Shineway Pharmaceutical Group analyst has a price target of CN¥10.12 per share, while the most pessimistic values it at CN¥6.71. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that China Shineway Pharmaceutical Group's revenue growth is expected to slow, with forecast 4.2% increase next year well below the historical 5.5% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 16% per year. Factoring in the forecast slowdown in growth, it seems obvious that China Shineway Pharmaceutical Group is also expected to grow slower than other industry participants.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that China Shineway Pharmaceutical Group's revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on China Shineway Pharmaceutical Group after today.
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 China Shineway Pharmaceutical Group analysts - going out to 2022, and you can see them 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 that insiders are buying.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.