Things Look Grim For Topsports International Holdings Limited (HKG:6110) After Today's Downgrade

One thing we could say about the analysts on Topsports International Holdings Limited (HKG:6110) - 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 4.1% to HK$5.81 over 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 22 analysts covering Topsports International Holdings are now predicting revenues of CN¥34b in 2023. If met, this would reflect a reasonable 7.0% improvement in sales compared to the last 12 months. Per-share earnings are expected to accumulate 6.6% to CN¥0.42. Before this latest update, the analysts had been forecasting revenues of CN¥39b and earnings per share (EPS) of CN¥0.52 in 2023. Indeed, we can see that the analysts are a lot more bearish about Topsports International Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Topsports International Holdings

The consensus price target fell 15% to CN¥7.46, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Topsports International Holdings, with the most bullish analyst valuing it at CN¥11.50 and the most bearish at CN¥5.90 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 7.0% growth on an annualised basis. That is in line with its 6.4% annual growth over the past five years. Compare this with the broader industry (in aggregate), which analyst estimates suggest will see revenues grow 16% annually. So although Topsports International Holdings is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Topsports International Holdings' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Topsports International Holdings going out to 2025, 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.