Analysts Just Shaved Their Shimao Services Holdings Limited (HKG:873) Forecasts Dramatically

Market forces rained on the parade of Shimao Services Holdings Limited (HKG:873) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Shares are up 6.4% to HK$2.15 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After this downgrade, Shimao Services Holdings' ten analysts are now forecasting revenues of CN¥9.2b in 2022. This would be an okay 4.4% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to nosedive 21% to CN¥0.22 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥11b and earnings per share (EPS) of CN¥0.52 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for Shimao Services Holdings

The consensus price target fell 28% to CN¥2.66, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. Currently, the most bullish analyst values Shimao Services Holdings at CN¥4.86 per share, while the most bearish prices it at CN¥1.55. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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 Shimao Services Holdings' revenue growth is expected to slow, with the forecast 9.0% annualised growth rate until the end of 2022 being well below the historical 15% growth over the last year. Compare this to the 275 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 8.4% per year. So it's pretty clear that, while Shimao Services Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the 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. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 Shimao Services Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Shimao Services Holdings 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.