Analysts Just Shaved Their CALB Group Co., Ltd. (HKG:3931) Forecasts Dramatically

One thing we could say about the analysts on CALB Group Co., Ltd. (HKG:3931) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of HK$14.50 reflecting a 12% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the current consensus from CALB Group's six analysts is for revenues of CN¥33b in 2024 which - if met - would reflect a huge 24% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 239% to CN¥0.56. Prior to this update, the analysts had been forecasting revenues of CN¥49b and earnings per share (EPS) of CN¥0.91 in 2024. Indeed, we can see that the analysts are a lot more bearish about CALB Group's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for CALB Group

The consensus price target fell 5.4% to CN¥17.93, with the weaker earnings outlook clearly leading analyst valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on CALB Group, with the most bullish analyst valuing it at CN¥35.10 and the most bearish at CN¥10.10 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that CALB Group's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 24% growth on an annualised basis. This is compared to a historical growth rate of 56% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% annually. Even after the forecast slowdown in growth, it seems obvious that CALB Group is also expected to grow faster than the wider industry.

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 CALB Group. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of CALB Group.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with CALB Group's financials, such as its declining profit margins. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.