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Analysts Are More Bearish On Mesoblast Limited (ASX:MSB) Than They Used To Be

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·3 min read
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One thing we could say about the analysts on Mesoblast Limited (ASX:MSB) - 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) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After this downgrade, Mesoblast's nine analysts are now forecasting revenues of US$101m in 2021. This would be a sizeable improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 74% to US$0.045. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$128m and losses of US$0.031 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Mesoblast

earnings-and-revenue-growth
earnings-and-revenue-growth

The consensus price target fell 30% to AU$5.08, implicitly signalling that lower earnings per share are a leading indicator for Mesoblast's valuation. 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 Mesoblast analyst has a price target of AU$7.89 per share, while the most pessimistic values it at AU$1.22. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Mesoblast's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Mesoblast is forecast to grow faster in the future than it has in the past, with revenues expected to grow manyfold. If achieved, this would be a much better result than the 1.8% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 11% next year. Not only are Mesoblast's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Mesoblast.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Mesoblast analysts - going out to 2025, and you can see them 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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.