These Analysts Just Made A Notable Downgrade To Their Shimao Services Holdings Limited (HKG:873) EPS Forecasts

The latest analyst coverage could presage a bad day for Shimao Services Holdings Limited (HKG:873), 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 the analysts seeing grey clouds on the horizon.

Following the latest downgrade, Shimao Services Holdings' six analysts currently expect revenues in 2024 to be CN¥8.2b, approximately in line with the last 12 months. Statutory earnings per share are presumed to surge 35% to CN¥0.15. Prior to this update, the analysts had been forecasting revenues of CN¥9.4b and earnings per share (EPS) of CN¥0.17 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.

Check out our latest analysis for Shimao Services Holdings

The consensus price target fell 7.6% to CN¥0.94, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. Currently, the most bullish analyst values Shimao Services Holdings at CN¥1.12 per share, while the most bearish prices it at CN¥0.76. 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 Shimao Services Holdings shareholders.

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. We would highlight that Shimao Services Holdings' revenue growth is expected to slow, with the forecast 0.5% annualised growth rate until the end of 2024 being well below the historical 26% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that Shimao Services Holdings is also expected to grow slower than other industry participants.

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 Shimao Services Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Shimao Services Holdings' revenues are expected to grow slower 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Shimao Services Holdings analysts - going out to 2026, and you can see them 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.