Sa Sa International Holdings Limited (HKG:178) Analysts Are Reducing Their Forecasts For This Year

The latest analyst coverage could presage a bad day for Sa Sa International Holdings Limited (HKG:178), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from eight analysts covering Sa Sa International Holdings is for revenues of HK$3.3b in 2021, implying a definite 9.6% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 60% to HK$0.089. Yet before this consensus update, the analysts had been forecasting revenues of HK$4.6b and losses of HK$0.047 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Sa Sa International Holdings

The consensus price target was broadly unchanged at HK$1.28, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Sa Sa International Holdings analyst has a price target of HK$1.68 per share, while the most pessimistic values it at HK$0.93. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. Over the past five years, revenues have declined around 6.7% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 9.6% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 13% next year. So while a broad number of companies are forecast to grow, unfortunately Sa Sa International Holdings is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Sa Sa International Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sa Sa International Holdings' revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Sa Sa International Holdings after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Sa Sa International Holdings analysts - going out to 2023, 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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