Country Garden Holdings Company Limited (HKG:2007) Analysts Are More Bearish Than They Used To Be

The analysts covering Country Garden Holdings Company Limited (HKG:2007) 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.

Following the latest downgrade, the 18 analysts covering Country Garden Holdings provided consensus estimates of CN¥436b revenue in 2022, which would reflect a measurable 3.2% decline on its sales over the past 12 months. Per-share earnings are expected to jump 22% to CN¥0.63. Prior to this update, the analysts had been forecasting revenues of CN¥503b and earnings per share (EPS) of CN¥1.06 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Country Garden Holdings

The consensus price target fell 25% to CN¥3.40, with the weaker earnings outlook clearly leading analyst valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Country Garden Holdings at CN¥7.89 per share, while the most bearish prices it at CN¥2.00. 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.

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. We would highlight that sales are expected to reverse, with a forecast 6.4% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 16% 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 8.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Country Garden 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 Country Garden Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Country Garden Holdings.

There might be good reason for analyst bearishness towards Country Garden Holdings, like its declining profit margins. For more information, you can click here to discover this and the 3 other flags we've identified.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.