Some Analysts Just Cut Their Guangzhou R&F Properties Co., Ltd. (HKG:2777) Estimates

One thing we could say about the analysts on Guangzhou R&F Properties Co., Ltd. (HKG:2777) - 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 consensus from Guangzhou R&F Properties' eight analysts is for revenues of CN¥50b in 2022, which would reflect a not inconsiderable 8.2% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 76% to CN¥1.72. Previously, the analysts had been modelling revenues of CN¥76b and earnings per share (EPS) of CN¥3.37 in 2022. There looks to have been a major change in sentiment regarding Guangzhou R&F Properties' prospects, with a sizeable cut to revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for Guangzhou R&F Properties

The consensus price target fell 22% to CN¥2.62, implicitly signalling that lower earnings per share are a leading indicator for Guangzhou R&F Properties' valuation. 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 Guangzhou R&F Properties at CN¥8.44 per share, while the most bearish prices it at CN¥1.22. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2022. This indicates a significant reduction from annual growth of 4.9% 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. It's pretty clear that Guangzhou R&F Properties' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Guangzhou R&F Properties dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Guangzhou R&F Properties' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Guangzhou R&F Properties after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Guangzhou R&F Properties analysts - going out to 2024, and you can see them 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.