These Analysts Just Made An Downgrade To Their Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) EPS Forecasts

One thing we could say about the analysts on Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) - 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 the analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of HK$4.10 reflecting a 21% 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.

After this downgrade, Xiabuxiabu Catering Management (China) Holdings' eleven analysts are now forecasting revenues of CN¥5.7b in 2022. This would be a satisfactory 7.8% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 65% to CN¥0.17. Previously, the analysts had been modelling revenues of CN¥6.5b and earnings per share (EPS) of CN¥0.11 in 2022. There looks to have been a major change in sentiment regarding Xiabuxiabu Catering Management (China) Holdings' prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Xiabuxiabu Catering Management (China) Holdings

There was no major change to the consensus price target of CN¥3.71, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Xiabuxiabu Catering Management (China) Holdings, with the most bullish analyst valuing it at CN¥5.45 and the most bearish at CN¥3.11 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Xiabuxiabu Catering Management (China) Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 11% 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 31% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Xiabuxiabu Catering Management (China) Holdings is expected to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Xiabuxiabu Catering Management (China) Holdings to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Xiabuxiabu Catering Management (China) Holdings.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Xiabuxiabu Catering Management (China) Holdings analysts - 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.