Sa Sa International Holdings Limited (HKG:178) Analysts Are Way More Bearish Than They Used To Be

Market forces rained on the parade of Sa Sa International Holdings Limited (HKG:178) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Shares are up 4.4% to HK$1.89 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the six analysts covering Sa Sa International Holdings are now predicting revenues of HK$3.9b in 2022. If met, this would reflect a notable 17% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 58% to HK$0.04. Prior to this update, the analysts had been forecasting revenues of HK$4.6b and earnings per share (EPS) of HK$0.064 in 2022. So we can see that the consensus has become notably more bearish on Sa Sa International Holdings' outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

See our latest analysis for Sa Sa International Holdings

The consensus price target was broadly unchanged at HK$1.66, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Sa Sa International Holdings, with the most bullish analyst valuing it at HK$2.10 and the most bearish at HK$0.90 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sa Sa International Holdings' past performance and to peers in the same industry. One thing stands out from these estimates, which is that Sa Sa International Holdings is forecast to grow faster in the future than it has in the past, with revenues expected to display 17% annualised growth until the end of 2022. If achieved, this would be a much better result than the 17% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 19% annually. So it looks like Sa Sa International Holdings is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Sa Sa International Holdings dropped from profits to a loss this year. 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. 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 2024, and you can see them free on our platform here.

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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.

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