Analysts Just Shaved Their Ruijie Networks Co., Ltd. (SZSE:301165) Forecasts Dramatically

Today is shaping up negative for Ruijie Networks Co., Ltd. (SZSE:301165) 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 the analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Ruijie Networks' six analysts is for revenues of CN¥15b in 2024, which would reflect a substantial 27% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 53% to CN¥1.08. Previously, the analysts had been modelling revenues of CN¥16b and earnings per share (EPS) of CN¥1.55 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Ruijie Networks

Analysts made no major changes to their price target of CN¥50.75, suggesting the downgrades are not expected to have a long-term impact on Ruijie Networks' valuation.

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 Ruijie Networks' growth to accelerate, with the forecast 27% annualised growth to the end of 2024 ranking favourably alongside historical growth of 18% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 23% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Ruijie Networks is expected to grow at about the same rate as the wider industry.

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. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Ruijie Networks after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Ruijie Networks 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.