The Consensus EPS Estimates For China Overseas Land & Investment Limited (HKG:688) Just Fell Dramatically

The analysts covering China Overseas Land & Investment Limited (HKG:688) 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 the analysts seeing grey clouds on the horizon. Shares are up 4.6% to HK$20.00 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After this downgrade, China Overseas Land & Investment's 21 analysts are now forecasting revenues of CN¥200b in 2023. This would be a meaningful 11% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to climb 15% to CN¥2.45. Before this latest update, the analysts had been forecasting revenues of CN¥230b and earnings per share (EPS) of CN¥3.00 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for China Overseas Land & Investment

Despite the cuts to forecast earnings, there was no real change to the HK$25.94 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic China Overseas Land & Investment analyst has a price target of HK$31.29 per share, while the most pessimistic values it at HK$20.90. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 11% growth on an annualised basis. That is in line with its 12% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 8.9% per year. It's clear that while China Overseas Land & Investment's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

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 China Overseas Land & Investment. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 China Overseas Land & Investment.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple China Overseas Land & Investment analysts - 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.