Bearish: Analysts Just Cut Their Chinasoft International Limited (HKG:354) Revenue and EPS estimates

The analysts covering Chinasoft International Limited (HKG:354) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the eleven analysts covering Chinasoft International are now predicting revenues of CN¥21b in 2023. If met, this would reflect an okay 7.3% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 22% to CN¥0.32. Prior to this update, the analysts had been forecasting revenues of CN¥26b and earnings per share (EPS) of CN¥0.47 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Chinasoft International

It'll come as no surprise then, to learn that the analysts have cut their price target 20% to CN¥6.44. 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 Chinasoft International analyst has a price target of CN¥12.54 per share, while the most pessimistic values it at CN¥5.78. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Chinasoft International's revenue growth is expected to slow, with the forecast 7.3% annualised growth rate until the end of 2023 being well below the historical 17% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10.0% annually. Factoring in the forecast slowdown in growth, it seems obvious that Chinasoft International is also expected to grow slower than other industry participants.

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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Chinasoft International.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Chinasoft International analysts - going out to 2025, 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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