Time To Worry? Analysts Just Downgraded Their Guangzhou R&F Properties Co., Ltd. (HKG:2777) Outlook

One thing we could say about the analysts on Guangzhou R&F Properties Co., Ltd. (HKG:2777) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. At HK$1.33, shares are up 7.3% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the consensus from four analysts covering Guangzhou R&F Properties is for revenues of CN¥33b in 2023, implying a small 3.4% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 54% to CN¥1.69. Yet before this consensus update, the analysts had been forecasting revenues of CN¥36b and losses of CN¥1.61 per share in 2023. 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

The consensus price target fell 6.3% to CN¥0.99, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Guangzhou R&F Properties, with the most bullish analyst valuing it at CN¥1.19 and the most bearish at CN¥0.75 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Guangzhou R&F Properties shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 11% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. 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 consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Guangzhou R&F Properties' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Guangzhou R&F Properties going forwards.

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 Guangzhou R&F Properties going out to 2025, and you can see them 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.