News Flash: 3 Analysts Think GRG Metrology & Test Group Co., Ltd. (SZSE:002967) Earnings Are Under Threat

The latest analyst coverage could presage a bad day for GRG Metrology & Test Group Co., Ltd. (SZSE:002967), 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 12% to CN¥16.31 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After this downgrade, GRG Metrology & Test Group's three analysts are now forecasting revenues of CN¥3.2b in 2024. This would be a solid 11% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 47% to CN¥0.51. Prior to this update, the analysts had been forecasting revenues of CN¥3.7b and earnings per share (EPS) of CN¥0.63 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for GRG Metrology & Test Group

The average price target climbed 7.4% to CN¥18.22 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that GRG Metrology & Test Group's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 17% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 18% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than GRG Metrology & Test Group.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for GRG Metrology & Test Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that GRG Metrology & Test Group's revenues are expected to grow slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of GRG Metrology & Test Group.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple GRG Metrology & Test Group 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.

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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.