One GOME Retail Holdings Limited (HKG:493) Analyst Is Reducing Their Forecasts For This Year

One thing we could say about the covering analyst on GOME Retail Holdings Limited (HKG:493) - 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.

After the downgrade, the consensus from GOME Retail Holdings' one analyst is for revenues of CN¥23b in 2022, which would reflect a stressful 29% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching CN¥0.19 per share. Yet before this consensus update, the analyst had been forecasting revenues of CN¥38b and losses of CN¥0.10 per share in 2022. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Our analysis indicates that 493 is potentially undervalued!

The consensus price target fell 72% to CN¥0.092, implicitly signalling that lower earnings per share are a leading indicator for GOME Retail Holdings' 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. One more thing stood out to us about these estimates, and it's the idea that GOME Retail Holdings' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 29% to the end of 2022. This tops off a historical decline of 14% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 13% annually. So while a broad number of companies are forecast to grow, unfortunately GOME Retail Holdings is expected to see its sales affected worse than other companies in the 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 GOME Retail Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for GOME Retail Holdings going out as far as 2023, and you can see them 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.

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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.