Analysts Just Slashed Their Medical Developments International Limited (ASX:MVP) EPS Numbers
The latest analyst coverage could presage a bad day for Medical Developments International Limited (ASX:MVP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the current consensus from Medical Developments International's three analysts is for revenues of AU$26m in 2021 which - if met - would reflect a satisfactory 7.5% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching AU$0.052 per share. However, before this estimates update, the consensus had been expecting revenues of AU$29m and AU$0.018 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Medical Developments International
There was no major change to the consensus price target of AU$7.07, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Medical Developments International, with the most bullish analyst valuing it at AU$7.10 and the most bearish at AU$7.03 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Medical Developments International is an easy business to forecast or the underlying assumptions are obvious.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Medical Developments International's rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 10% 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 38% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Medical Developments International is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Medical Developments International. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Medical Developments International's revenues are expected to grow slower than 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 Medical Developments International.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Medical Developments International analysts - going out to 2023, and you can see them free on our platform here.
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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. 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.
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