Time To Worry? Analysts Are Downgrading Their Carote Ltd (HKG:2549) Outlook

Today is shaping up negative for Carote Ltd (HKG:2549) 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 current consensus from Carote's three analysts is for revenues of CN¥2.6b in 2025 which - if met - would reflect a substantial 23% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to reduce 6.5% to CN¥0.60 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥3.0b and earnings per share (EPS) of CN¥0.83 in 2025. Indeed, we can see that the analysts are a lot more bearish about Carote's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Carote

The consensus price target fell 8.9% to CN¥7.73, with the weaker earnings outlook clearly leading analyst valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Carote analyst has a price target of CN¥8.80 per share, while the most pessimistic values it at CN¥6.01. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Carote's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Carote's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 23% growth on an annualised basis. This is compared to a historical growth rate of 37% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.6% per year. Even after the forecast slowdown in growth, it seems obvious that Carote is also expected to grow faster than 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. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Carote.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Carote analysts - going out to 2027, 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 backed by insiders.

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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.