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The latest analyst coverage could presage a bad day for HLS Therapeutics Inc. (TSE:HLS), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the four analysts covering HLS Therapeutics are now predicting revenues of US$69m in 2024. If met, this would reflect a meaningful 10.0% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 72% to US$0.25. However, before this estimates update, the consensus had been expecting revenues of US$81m and US$0.10 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
View our latest analysis for HLS Therapeutics
The consensus price target fell 32% to US$6.07, implicitly signalling that lower earnings per share are a leading indicator for HLS Therapeutics' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on HLS Therapeutics, with the most bullish analyst valuing it at US$8.35 and the most bearish at US$3.63 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. It's clear from the latest estimates that HLS Therapeutics' rate of growth is expected to accelerate meaningfully, with the forecast 7.9% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 1.1% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. So it's clear that despite the acceleration in growth, HLS Therapeutics is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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.