One thing we could say about the analysts on Galaxy Entertainment Group Limited (HKG:27) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the 16 analysts covering Galaxy Entertainment Group are now predicting revenues of HK$23b in 2022. If met, this would reflect a notable 16% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 69% to HK$0.51. Before this latest update, the analysts had been forecasting revenues of HK$25b and earnings per share (EPS) of HK$0.76 in 2022. The forecasts seem less optimistic after the new consensus numbers, with lower sales estimates and making a large cut to earnings per share forecasts.
Analysts made no major changes to their price target of HK$53.32, suggesting the downgrades are not expected to have a long-term impact on Galaxy Entertainment Group's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Galaxy Entertainment Group, with the most bullish analyst valuing it at HK$60.00 and the most bearish at HK$47.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Galaxy Entertainment Group is an easy business to forecast or the underlying assumptions are obvious.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Galaxy Entertainment Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 22% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 21% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 25% per year. So it looks like Galaxy Entertainment Group 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Galaxy Entertainment Group after the downgrade.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Galaxy Entertainment Group going out to 2024, and you can see them free on our platform here.
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.