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One thing we could say about the analysts on OrganiGram Holdings Inc. (TSE:OGI) - 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. The stock price has risen 7.0% to CA$2.30 over the past week. 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 OrganiGram Holdings' 14 analysts is for revenues of CA$93m in 2021 which - if met - would reflect a notable 15% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 72% to CA$0.26. Yet before this consensus update, the analysts had been forecasting revenues of CA$108m and losses of CA$0.089 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 6.8% to CA$2.47, implicitly signalling that lower earnings per share are a leading indicator for OrganiGram Holdings' 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. There are some variant perceptions on OrganiGram Holdings, with the most bullish analyst valuing it at CA$3.89 and the most bearish at CA$1.75 per share. 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 pretty clear that there is an expectation that OrganiGram Holdings' revenue growth will slow down substantially, with revenues next year expected to grow 15%, compared to a historical growth rate of 61% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 33% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than OrganiGram Holdings.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of OrganiGram Holdings.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple OrganiGram Holdings 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.
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