The Consensus EPS Estimates For IMAX China Holding, Inc. (HKG:1970) Just Fell Dramatically

One thing we could say about the analysts on IMAX China Holding, Inc. (HKG:1970) - 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the twin analysts covering IMAX China Holding provided consensus estimates of US$91m revenue in 2022, which would reflect a considerable 19% decline on its sales over the past 12 months. Statutory earnings per share are supposed to dive 38% to US$0.07 in the same period. Previously, the analysts had been modelling revenues of US$107m and earnings per share (EPS) of US$0.09 in 2022. Indeed, we can see that the analysts are a lot more bearish about IMAX China Holding's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for IMAX China Holding

It'll come as no surprise then, to learn that the analysts have cut their price target 10% to US$1.38. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic IMAX China Holding analyst has a price target of US$11.60 per share, while the most pessimistic values it at US$10.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that IMAX China Holding's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 19% to the end of 2022. This tops off a historical decline of 7.9% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 16% annually. So while a broad number of companies are forecast to grow, unfortunately IMAX China Holding is expected to see its sales affected worse than other companies in the 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that IMAX China Holding's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2024, 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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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.