The latest analyst coverage could presage a bad day for Yixin Group Limited (HKG:2858), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the consensus from Yixin Group's sole analyst is for revenues of CN¥3.5b in 2020, which would reflect a substantial 39% decline in sales compared to the last year of performance. Before the latest update, the analyst was foreseeing CN¥6.2b of revenue in 2020. The consensus view seems to have become more pessimistic on Yixin Group, noting the sizeable cut to revenue estimates in this update.
The consensus price target fell 14% to CN¥1.42, with the analyst clearly less optimistic about Yixin Group's valuation following this update. 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. There are some variant perceptions on Yixin Group, with the most bullish analyst valuing it at CN¥1.47 and the most bearish at CN¥1.37 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 39%, a significant reduction from annual growth of 36% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 23% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Yixin Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of Yixin Group's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Yixin Group going forwards.
Hungry for more information? One Yixin Group broker/analyst has provided estimates out to 2021, which can be seen for 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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