These Analysts Think China Maple Leaf Educational Systems Limited's (HKG:1317) Sales Are Under Threat

Market forces rained on the parade of China Maple Leaf Educational Systems Limited (HKG:1317) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the latest consensus from China Maple Leaf Educational Systems' four analysts is for revenues of CN¥1.0b in 2022, which would reflect a meaningful 8.4% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CN¥2.2b of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on China Maple Leaf Educational Systems, given the sizeable cut to revenue estimates.

See our latest analysis for China Maple Leaf Educational Systems

The consensus price target fell 16% to CN¥0.98, with the analysts clearly less optimistic about China Maple Leaf Educational Systems' valuation following this update. 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 China Maple Leaf Educational Systems, with the most bullish analyst valuing it at CN¥2.03 and the most bearish at CN¥0.40 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that China Maple Leaf Educational Systems' rate of growth is expected to accelerate meaningfully, with the forecast 8.4% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 4.5% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, China Maple Leaf Educational Systems is expected to grow slower than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for China Maple Leaf Educational Systems this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on China Maple Leaf Educational Systems after today.

Still got questions? At least one of China Maple Leaf Educational Systems' four analysts has provided estimates out to 2024, which can be seen for 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.