Analysts Are More Bearish On Agile Group Holdings Limited (HKG:3383) Than They Used To Be

The analysts covering Agile Group Holdings Limited (HKG:3383) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 6.9% to HK$1.08 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the current consensus from Agile Group Holdings' seven analysts is for revenues of CN¥51b in 2023 which - if met - would reflect a substantial 21% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 84% to CN¥0.68 per share. However, before this estimates update, the consensus had been expecting revenues of CN¥57b and CN¥0.40 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Agile Group Holdings

The consensus price target fell 23% to CN¥1.38, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Agile Group Holdings, with the most bullish analyst valuing it at CN¥3.65 and the most bearish at CN¥0.65 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Agile Group Holdings' past performance and to peers in the same industry. It's clear from the latest estimates that Agile Group Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 21% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 0.5% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.6% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Agile Group Holdings is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Agile Group Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. You can learn more about our debt analysis for free on our platform here.

You can also see our analysis of Agile Group Holdings' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.