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Bubs Australia Limited (ASX:BUB) Analysts Are More Bearish Than They Used To Be

Simply Wall St
·3 min read

The analysts covering Bubs Australia Limited (ASX:BUB) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Bubs Australia's three analysts are now forecasting revenues of AU$67m in 2021. This would be a huge 22% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 21% to AU$0.011. Yet before this consensus update, the analysts had been forecasting revenues of AU$76m and losses of AU$0.0095 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.

See our latest analysis for Bubs Australia

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earnings-and-revenue-growth

The consensus price target fell 14% to AU$0.69, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Bubs Australia, with the most bullish analyst valuing it at AU$0.80 and the most bearish at AU$0.61 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Bubs Australia's revenue growth is expected to slow, with forecast 22% increase next year well below the historical 60% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.3% next year. Even after the forecast slowdown in growth, it seems obvious that Bubs Australia is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Bubs Australia. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Bubs Australia.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Bubs Australia going out to 2025, 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.

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.