Analysts Just Made A Major Revision To Their KWG Group Holdings Limited (HKG:1813) Revenue Forecasts

One thing we could say about the analysts on KWG Group Holdings Limited (HKG:1813) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the 15 analysts covering KWG Group Holdings are now predicting revenues of CN¥33b in 2022. If met, this would reflect a huge 38% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 43% to CN¥1.37. Prior to this update, the analysts had been forecasting revenues of CN¥37b and earnings per share (EPS) of CN¥1.47 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a minor downgrade to earnings per share numbers as well.

View our latest analysis for KWG Group Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 9.2% to CN¥5.05. 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. The most optimistic KWG Group Holdings analyst has a price target of CN¥14.57 per share, while the most pessimistic values it at CN¥3.27. 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. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that KWG Group Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 38% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 29% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect KWG Group Holdings to grow faster than 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 KWG Group Holdings. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of KWG Group Holdings' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on KWG Group Holdings after today.

There might be good reason for analyst bearishness towards KWG Group Holdings, like its declining profit margins. Learn more, and discover the 3 other risks 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.