The latest analyst coverage could presage a bad day for Next Science Limited (ASX:NXS), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Next Science from its two analysts is for revenues of US$22m in 2023 which, if met, would be a sizeable 31% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$24m of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on Next Science, given the substantial drop in revenue estimates.

Check out our latest analysis for Next Science

Notably, the analysts have cut their price target 41% to US$0.22, suggesting concerns around Next Science's valuation. 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. The most optimistic Next Science analyst has a price target of US$0.25 per share, while the most pessimistic values it at US$0.18. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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 Next Science's rate of growth is expected to accelerate meaningfully, with the forecast 73% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 51% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Next Science to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Next Science's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Next Science after today.

That said, the analysts might have good reason to be negative on Next Science, given a short cash runway. Learn more, and discover the 3 other concerns we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.