Time To Worry? One Analyst Just Downgraded Their Medicure Inc. (CVE:MPH) Outlook
Today is shaping up negative for Medicure Inc. (CVE:MPH) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
Following the latest downgrade, Medicure's sole analyst currently expects revenues in 2020 to be CA$20m, approximately in line with the last 12 months. Losses are predicted to fall substantially, shrinking 73% to CA$0.36. Prior to this update, the analyst had been forecasting revenues of CA$37m and earnings per share (EPS) of CA$0.21 in 2020. There looks to have been a major change in sentiment regarding Medicure's prospects, with a pretty serious reduction to revenues and the analyst now forecasting a loss instead of a profit.
View our latest analysis for Medicure
The consensus price target fell 57% to CA$2.80, implicitly signalling that lower earnings per share are a leading indicator for Medicure's valuation.
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 Medicure's revenue growth is expected to slow, with forecast 0.1% increase next year well below the historical 3.7% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 52% next year. Factoring in the forecast slowdown in growth, it seems obvious that Medicure is also expected to grow slower than other industry participants.
The Bottom Line
The biggest low-light for us was that the forecasts for Medicure dropped from profits to a loss this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Medicure's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Medicure going out as far as 2023, 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.
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