Analysts covering Ascletis Pharma Inc. (Hong Kong: 1672) today sent a dose of negativity to shareholders, substantially revising their statutory forecasts for this year. There has been a pretty drastic reduction in their revenue estimates, perhaps an implicit admission that previous forecasts were far too optimistic. The shares rose 9.1% to HK$2.89 last week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After this downward revision, the two analysts at Ascletis Pharma now forecast revenues of 85 million Canadian yen in 2022. This would be an acceptable improvement of 8.0% in sales compared to the last 12 months. Losses are expected to climb 36% to C¥0.22 per share. However, prior to this estimate update, the consensus was expecting revenue of 104 million Canadian yen and 0.21 domestic yen in losses per share. So there has been quite a shift in sentiment after recent consensus updates, with analysts seriously cutting their earnings forecasts while expecting higher losses per share.
There was no major change from the consensus price target of CN¥2.00, signaling that the company is performing roughly in line with expectations, despite lower earnings per share guidance. There is, however, another way to think about price targets, and that is to look at the range of price targets offered by analysts, as a wide range of estimates could suggest a diverse view of possible outcomes for the market. company. The most optimistic Ascletis Pharma analyst has a price target of CN¥2.24 per share, while the most pessimistic puts it at CN¥2.05. With such a narrow valuation range, analysts apparently share similar views on what they think the company is worth.
Of course, another way to look at these predictions is to put them in context with the industry itself. For example, we noticed that the growth rate of Ascletis Pharma is expected to accelerate significantly, with revenues expected to show 17% growth by the end of 2022 on an annualized basis. That’s well above its historic decline of 36% per year over the past three years. In contrast, our data suggests that other companies (with analyst coverage) in a similar industry should see revenue growth of 42% annually. So while Ascletis Pharma’s revenue growth is expected to improve, it is still expected to grow more slowly than the industry.
The most important thing to note from this downgrade is that the consensus has raised its loss forecast this year, suggesting that all may not be well at Ascletis Pharma. Unfortunately, analysts have also lowered their revenue estimates, and industry data suggests that Ascletis Pharma’s revenue is expected to grow more slowly than the broader market. Often a downgrade can trigger a chain of daisy chain cuts, especially if an industry is in decline. We would therefore not be surprised if the market became much more cautious on Ascletis Pharma after today.
Even so, the longer-term trajectory of the company is far more important to the creation of shareholder value. We have analyst estimates for Ascletis Pharma going through 2024, and you can see them for free on our platform here.
Another way to search for interesting businesses that might be reach an inflection point is to track whether management is buying or selling, with our free list of growing companies that insiders are buying.
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Find out if Ascletis Pharma is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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