One thing we could say about the analysts on Sino Biopharmaceutical Limited (HKG:1177) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Sino Biopharmaceutical's 22 analysts is for revenues of CN¥29b in 2024, which would reflect a decent 10% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 53% to CN¥0.15. Prior to this update, the analysts had been forecasting revenues of CN¥33b and earnings per share (EPS) of CN¥0.17 in 2024. Indeed, we can see that the analysts are a lot more bearish about Sino Biopharmaceutical's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Despite the cuts to forecast earnings, there was no real change to the CN¥4.31 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. Currently, the most bullish analyst values Sino Biopharmaceutical at CN¥8.45 per share, while the most bearish prices it at CN¥2.80. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. The analysts are definitely expecting Sino Biopharmaceutical's growth to accelerate, with the forecast 10% annualised growth to the end of 2024 ranking favourably alongside historical growth of 5.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Sino Biopharmaceutical is expected to grow at about the same rate as 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 Sino Biopharmaceutical. 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. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Sino Biopharmaceutical.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Sino Biopharmaceutical going out to 2026, and you can see them 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.