One thing we could say about the analysts on CanSino Biologics Inc. (HKG:6185) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the five analysts covering CanSino Biologics provided consensus estimates of CN¥2.4b revenue in 2022, which would reflect a sizeable 45% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plunge 87% to CN¥1.09 in the same period. Previously, the analysts had been modelling revenues of CN¥2.7b and earnings per share (EPS) of CN¥1.13 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

Check out our latest analysis for CanSino Biologics

Despite the cuts to forecast earnings, there was no real change to the CN¥148 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on CanSino Biologics, with the most bullish analyst valuing it at CN¥197 and the most bearish at CN¥135 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CanSino Biologics' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 55% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 133% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - CanSino Biologics is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for CanSino Biologics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on CanSino Biologics after today.

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 CanSino Biologics' business, like concerns around earnings quality. For more information, you can click here to discover this and the 1 other flag we've identified.

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