Things Look Grim For Genius Electronic Optical Co., Ltd. (TPE:3406) After Today's Downgrade

The latest analyst coverage could presage a bad day for Genius Electronic Optical Co., Ltd. (TPE:3406), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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. At NT$489, shares are up 5.6% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the five analysts covering Genius Electronic Optical provided consensus estimates of NT$15b revenue in 2021, which would reflect a discernible 3.8% decline on its sales over the past 12 months. Statutory earnings per share are presumed to rise 2.8% to NT$28.19. Before this latest update, the analysts had been forecasting revenues of NT$18b and earnings per share (EPS) of NT$33.90 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for Genius Electronic Optical

It'll come as no surprise then, to learn that the analysts have cut their price target 8.7% to NT$614. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Genius Electronic Optical, with the most bullish analyst valuing it at NT$782 and the most bearish at NT$460 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.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.8% by the end of 2021. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.1% per year. It's pretty clear that Genius Electronic Optical's revenues are expected to perform substantially worse than 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 Genius Electronic Optical. 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 Genius Electronic Optical.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Genius Electronic Optical's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other flags we've identified, for 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. 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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