Analysts Just Shaved Their Guangzhou R&F Properties Co., Ltd. (HKG:2777) Forecasts Dramatically

The latest analyst coverage could presage a bad day for Guangzhou R&F Properties Co., Ltd. (HKG:2777), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the consensus from Guangzhou R&F Properties' twin analysts is for revenues of CN¥17b in 2024, which would reflect a painful 54% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 74% to CN¥1.38. However, before this estimates update, the consensus had been expecting revenues of CN¥29b and CN¥0.87 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Guangzhou R&F Properties

There was no major change to the consensus price target of CN¥0.93, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. Currently, the most bullish analyst values Guangzhou R&F Properties at CN¥1.12 per share, while the most bearish prices it at CN¥0.74. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. Over the past five years, revenues have declined around 17% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 54% decline in revenue until the end of 2024. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 5.3% annually. So while a broad number of companies are forecast to grow, unfortunately Guangzhou R&F Properties 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 increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Guangzhou R&F Properties' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Guangzhou R&F Properties.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2026, which can be seen for 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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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.