Today is shaping up negative for Valeo Pharma Inc. (TSE:VPH) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the current consensus from Valeo Pharma's three analysts is for revenues of CA$79m in 2024 which - if met - would reflect a sizeable 48% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 69% to CA$0.087 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$90m and losses of CA$0.055 per share in 2024. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Valeo Pharma

The consensus price target fell 51% to CA$0.72, implicitly signalling that lower earnings per share are a leading indicator for Valeo Pharma's valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Valeo Pharma's revenue growth is expected to slow, with the forecast 37% annualised growth rate until the end of 2024 being well below the historical 50% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.7% annually. So it's pretty clear that, while Valeo Pharma'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 analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Valeo Pharma.

That said, the analysts might have good reason to be negative on Valeo Pharma, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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