Chinasoft International Limited (HKG:354) Analysts Just Cut Their EPS Forecasts Substantially

Today is shaping up negative for Chinasoft International Limited (HKG:354) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.

After this downgrade, Chinasoft International's ten analysts are now forecasting revenues of CN¥19b in 2024. This would be a decent 12% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 26% to CN¥0.34. Before this latest update, the analysts had been forecasting revenues of CN¥23b and earnings per share (EPS) of CN¥0.38 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for Chinasoft International

Despite the cuts to forecast earnings, there was no real change to the CN¥6.21 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Chinasoft International, with the most bullish analyst valuing it at CN¥7.32 and the most bearish at CN¥4.99 per share. 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.

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 2024 brings more of the same, according to the analysts, with revenue forecast to display 12% growth on an annualised basis. That is in line with its 13% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 14% per year. So although Chinasoft International is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Chinasoft International. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit 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 2026, 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.