Downgrade: Here's How Analysts See Longfor Group Holdings Limited (HKG:960) Performing In The Near Term

Today is shaping up negative for Longfor Group Holdings Limited (HKG:960) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Shares are up 7.4% to HK$10.80 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the 25 analysts covering Longfor Group Holdings, is for revenues of CN¥168b in 2024, which would reflect a measurable 7.0% reduction in Longfor Group Holdings' sales over the past 12 months. Statutory earnings per share are supposed to reduce 4.5% to CN¥1.81 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥188b and earnings per share (EPS) of CN¥2.57 in 2024. Indeed, we can see that the analysts are a lot more bearish about Longfor Group Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Longfor Group Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 10% to CN¥13.55. 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 Longfor Group Holdings at CN¥29.57 per share, while the most bearish prices it at CN¥8.87. 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 Longfor Group Holdings' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 7.0% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 12% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Longfor Group Holdings is expected to lag the wider industry.

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 Longfor Group Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Longfor Group Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Longfor Group Holdings.

That said, the analysts might have good reason to be negative on Longfor Group Holdings, given dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, for 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.