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Market forces rained on the parade of Althea Group Holdings Limited (ASX:AGH) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the latest consensus from Althea Group Holdings' solo analyst is for revenues of AU$25m in 2022, which would reflect a substantial 58% improvement in sales compared to the last 12 months. Losses are forecast to narrow 8.9% to AU$0.04 per share. However, before this estimates update, the consensus had been expecting revenues of AU$28m and AU$0.03 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 31% to AU$0.57, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Althea Group Holdings' revenue growth is expected to slow, with the forecast 58% annualised growth rate until the end of 2022 being well below the historical 82% p.a. growth over the last three years. Compare this to the 38 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 51% per year. So it's pretty clear that, while Althea Group Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for this year. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 Althea Group Holdings.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Althea Group Holdings' business, like a short cash runway. Learn more, and discover the 4 other warning signs we've identified, for 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.
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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.