What You Need To Know About The Logan Group Company Limited (HKG:3380) Analyst Downgrade Today

Today is shaping up negative for Logan Group Company Limited (HKG:3380) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After this downgrade, Logan Group's eleven analysts are now forecasting revenues of CN¥80b in 2022. This would be a huge 43% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CN¥89b in 2022. It looks like forecasts have become a fair bit less optimistic on Logan Group, given the substantial drop in revenue estimates.

See our latest analysis for Logan Group

The consensus price target fell 8.2% to CN¥3.50, with the analysts clearly less optimistic about Logan Group's valuation following this update. 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. There are some variant perceptions on Logan Group, with the most bullish analyst valuing it at CN¥8.86 and the most bearish at CN¥0.50 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.

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. The analysts are definitely expecting Logan Group's growth to accelerate, with the forecast 43% annualised growth to the end of 2022 ranking favourably alongside historical growth of 19% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Logan Group is expected to grow much faster than its industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Logan Group this year. They're also forecasting more rapid revenue growth 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 Logan Group's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Logan Group after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Logan Group's business, like its declining profit margins. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

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.