XD Inc. (HKG:2400) Analysts Just Cut Their EPS Forecasts Substantially

The analysts covering XD Inc. (HKG:2400) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from XD's eight analysts is for revenues of CN¥3.4b in 2021, which would reflect a sizeable 20% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 2,837% to CN¥0.62. Before this latest update, the analysts had been forecasting revenues of CN¥3.9b and earnings per share (EPS) of CN¥1.36 in 2021. Indeed, we can see that the analysts are a lot more bearish about XD's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for XD

The consensus price target fell 6.7% to CN¥55.95, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 XD at CN¥113 per share, while the most bearish prices it at CN¥41.53. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. The period to the end of 2021 brings more of the same, according to the analysts, with revenue forecast to display 20% growth on an annualised basis. That is in line with its 24% annual growth over the past three years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 24% per year. So although XD is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

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 XD. 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 XD.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for XD going out to 2025, 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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