Need To Know: Analysts Just Made A Substantial Cut To Their Seazen Group Limited (HKG:1030) Estimates

Today is shaping up negative for Seazen Group Limited (HKG:1030) 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 the analysts have soured majorly on the business.

Following this downgrade, Seazen Group's seven analysts are forecasting 2022 revenues to be CN¥132b, approximately in line with the last 12 months. Statutory earnings per share are anticipated to dive 25% to CN¥0.79 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥149b and earnings per share (EPS) of CN¥1.02 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Seazen Group

Despite the cuts to forecast earnings, there was no real change to the CN¥4.26 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. There are some variant perceptions on Seazen Group, with the most bullish analyst valuing it at CN¥6.45 and the most bearish at CN¥3.62 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.0% by the end of 2022. This indicates a significant reduction from annual growth of 33% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.0% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Seazen Group is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Seazen Group's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Seazen Group after the downgrade.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Seazen Group's financials, such as a weak balance sheet. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

We also provide an overview of the Seazen Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.