News Flash: 9 Analysts Think Zhou Hei Ya International Holdings Company Limited (HKG:1458) Earnings Are Under Threat

The analysts covering Zhou Hei Ya International Holdings Company Limited (HKG:1458) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. The stock price has risen 7.5% to HK$1.73 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After this downgrade, Zhou Hei Ya International Holdings' nine analysts are now forecasting revenues of CN¥3.0b in 2024. This would be a notable 10% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 86% to CN¥0.093. Before this latest update, the analysts had been forecasting revenues of CN¥3.6b and earnings per share (EPS) of CN¥0.16 in 2024. Indeed, we can see that the analysts are a lot more bearish about Zhou Hei Ya International Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Zhou Hei Ya International Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 20% to CN¥2.52. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Zhou Hei Ya International Holdings, with the most bullish analyst valuing it at CN¥3.54 and the most bearish at CN¥1.57 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Zhou Hei Ya International Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 10% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 4.5% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.5% annually. So it looks like Zhou Hei Ya International Holdings 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. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Zhou Hei Ya International Holdings.

Uncomfortably, our automated valuation tool also suggests that Zhou Hei Ya International Holdings stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. You can learn more about our valuation methodology for free on our platform here.

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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.