Today is shaping up negative for Novogene Co., Ltd. (SHSE:688315) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Novogene's three analysts is for revenues of CN¥2.3b in 2024, which would reflect a notable 15% improvement in sales compared to the last 12 months. Per-share earnings are expected to step up 15% to CN¥0.51. Prior to this update, the analysts had been forecasting revenues of CN¥2.8b and earnings per share (EPS) of CN¥0.68 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

It'll come as no surprise then, to learn that the analysts have cut their price target 29% to CN¥21.48.

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. The analysts are definitely expecting Novogene's growth to accelerate, with the forecast 15% annualised growth to the end of 2024 ranking favourably alongside historical growth of 10% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 13% annually. Novogene is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Novogene.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Novogene analysts - going out to 2026, and you can see them 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.