News Flash: 5 Analysts Think NagaCorp Ltd. (HKG:3918) Earnings Are Under Threat

Today is shaping up negative for NagaCorp Ltd. (HKG:3918) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of HK$3.37 reflecting a 12% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After this downgrade, NagaCorp's five analysts are now forecasting revenues of US$666m in 2024. This would be a substantial 33% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 37% to US$0.055. Before this latest update, the analysts had been forecasting revenues of US$775m and earnings per share (EPS) of US$0.068 in 2024. Indeed, we can see that the analysts are a lot more bearish about NagaCorp's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for NagaCorp

It'll come as no surprise then, to learn that the analysts have cut their price target 30% to US$0.51. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values NagaCorp at US$0.72 per share, while the most bearish prices it at US$0.38. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. One thing stands out from these estimates, which is that NagaCorp is forecast to grow faster in the future than it has in the past, with revenues expected to display 33% annualised growth until the end of 2024. If achieved, this would be a much better result than the 36% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 16% per year. So it looks like NagaCorp is expected to grow faster than its competitors, at least for a while.

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 NagaCorp. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will 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 NagaCorp.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple NagaCorp analysts - 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.