Market forces rained on the parade of Medical Developments International Limited (ASX:MVP) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At AU$3.88, shares are up 9.3% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following this downgrade, Medical Developments International's two analysts are forecasting 2022 revenues to be AU$22m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 39% to AU$0.16. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$26m and losses of AU$0.024 per share in 2022. 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.

Check out our latest analysis for Medical Developments International  earnings-and-revenue-growth

The consensus price target was broadly unchanged at AU$4.75, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic Medical Developments International analyst has a price target of AU$5.48 per share, while the most pessimistic values it at AU$4.01. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Medical Developments International shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Medical Developments International's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Medical Developments International's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 0.02% growth on an annualised basis. This is compared to a historical growth rate of 7.7% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 53% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Medical Developments International.



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. Given the stark change in sentiment, we'd understand if investors became more cautious on Medical Developments International after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Medical Developments International going out as far as 2024, 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.

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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.