Venus Medtech (Hangzhou) Inc. (HKG:2500) Consensus Forecasts Have Become A Little Darker Since Its Latest Report
Investors in Venus Medtech (Hangzhou) Inc. (HKG:2500) had a good week, as its shares rose 9.6% to close at HK$45.20 following the release of its yearly results. Revenues were in line with expectations, at CN¥233m, while statutory losses ballooned to CN¥1.22 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Venus Medtech (Hangzhou) after the latest results.
See our latest analysis for Venus Medtech (Hangzhou)
Taking into account the latest results, the current consensus from Venus Medtech (Hangzhou)'s seven analysts is for revenues of CN¥351.6m in 2020, which would reflect a major 51% increase on its sales over the past 12 months. Earnings are expected to improve, with Venus Medtech (Hangzhou) forecast to report a statutory profit of CN¥0.10 per share. Before this earnings report, the analysts had been forecasting revenues of CN¥442.9m and earnings per share (EPS) of CN¥0.14 in 2020. Indeed, we can see that the analysts are a lot more bearish about Venus Medtech (Hangzhou)'s prospects following the latest results, administering a large cut to revenue estimates and slashing their EPS estimates to boot.
Despite the cuts to forecast earnings, there was no real change to the CN¥46.26 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Venus Medtech (Hangzhou) analyst has a price target of CN¥52.18 per share, while the most pessimistic values it at CN¥41.65. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Venus Medtech (Hangzhou)'s revenue growth is expected to slow, with forecast 51% increase next year well below the historical 102% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 20% next year. So it's pretty clear that, while Venus Medtech (Hangzhou)'s revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also downgraded their revenue estimates, although industry data suggests that Venus Medtech (Hangzhou)'s revenues are expected to grow faster than the wider industry. The consensus price target held steady at CN¥46.26, with the latest estimates not enough to have an impact on their price targets.
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 Venus Medtech (Hangzhou) going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Venus Medtech (Hangzhou) Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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