One LVGEM (China) Real Estate Investment Company Limited (HKG:95) Analyst Just Made A Major Cut To Next Year's Estimates

One thing we could say about the covering analyst on LVGEM (China) Real Estate Investment Company Limited (HKG:95) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business. Surprisingly the share price has been buoyant, rising 26% to HK$1.10 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the consensus from solo analyst covering LVGEM (China) Real Estate Investment is for revenues of CN¥3.9b in 2022, implying a chunky 11% decline in sales compared to the last 12 months. After this downgrade, the company is anticipated to report a loss of CN¥0.25 in 2022, a sharp decline from a profit over the last year. Yet before this consensus update, the analyst had been forecasting revenues of CN¥4.6b and losses of CN¥0.13 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for LVGEM (China) Real Estate Investment

The consensus price target fell 28% to CN¥1.61, implicitly signalling that lower earnings per share are a leading indicator for LVGEM (China) Real Estate Investment's valuation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2022. This indicates a significant reduction from annual growth of 13% 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 9.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - LVGEM (China) Real Estate Investment is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of LVGEM (China) Real Estate Investment.

As you can see, this analyst clearly isn't bullish, and there might be good reason for that. We've identified some potential issues with LVGEM (China) Real Estate Investment's financials, such as recent substantial insider selling. Learn more, and discover the 4 other warning signs 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.