Earnings Release: Here's Why Analysts Cut Their HLS Therapeutics Inc. (TSE:HLS) Price Target To CA$6.57
Last week, you might have seen that HLS Therapeutics Inc. (TSE:HLS) released its yearly result to the market. The early response was not positive, with shares down 5.0% to CA$4.00 in the past week. The statutory results were mixed overall, with revenues of US$63m in line with analyst forecasts, but losses of US$0.85 per share, some 9.0% larger than the analysts were predicting. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for HLS Therapeutics
Taking into account the latest results, HLS Therapeutics' three analysts currently expect revenues in 2024 to be US$63.9m, approximately in line with the last 12 months. Losses are predicted to fall substantially, shrinking 26% to US$0.64. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$65.5m and losses of US$0.22 per share in 2024. So it's pretty clear the analysts have mixed opinions on HLS Therapeutics after this update; revenues were downgraded and per-share losses expected to increase.
The consensus price target fell 6.2% to CA$6.57, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic HLS Therapeutics analyst has a price target of CA$10.52 per share, while the most pessimistic values it at CA$4.17. We would probably assign less value to the analyst 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 a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. It's pretty clear that there is an expectation that HLS Therapeutics' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 1.3% growth on an annualised basis. This is compared to a historical growth rate of 2.0% 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 9.8% annually. Factoring in the forecast slowdown in growth, it seems obvious that HLS Therapeutics is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at HLS Therapeutics. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of HLS Therapeutics' future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for HLS Therapeutics going out to 2026, and you can see them free on our platform here.
Even so, be aware that HLS Therapeutics is showing 2 warning signs in our investment analysis , you should know about...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
