Some CMGE Technology Group Limited (HKG:302) Analysts Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of CMGE Technology Group Limited (HKG:302) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the current consensus from CMGE Technology Group's three analysts is for revenues of CN¥4.8b in 2022 which - if met - would reflect a substantial 21% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to decrease 9.5% to CN¥0.20 in the same period. Previously, the analysts had been modelling revenues of CN¥5.9b and earnings per share (EPS) of CN¥0.42 in 2022. Indeed, we can see that the analysts are a lot more bearish about CMGE Technology Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for CMGE Technology Group

It'll come as no surprise then, to learn that the analysts have cut their price target 12% to CN¥4.66. 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 CMGE Technology Group, with the most bullish analyst valuing it at CN¥7.04 and the most bearish at CN¥4.20 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 21% growth on an annualised basis. That is in line with its 26% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 19% annually. So although CMGE Technology Group is expected to maintain its revenue growth rate, it's only growing at about the rate of 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of CMGE Technology Group.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with CMGE Technology Group's business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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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.