Some Lufax Holding Ltd (NYSE:LU) Analysts Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of Lufax Holding Ltd (NYSE:LU) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from 16 analysts covering Lufax Holding is for revenues of CN¥53b in 2023, implying a painful 24% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to plummet 32% to CN¥3.68 in the same period. Previously, the analysts had been modelling revenues of CN¥65b and earnings per share (EPS) of CN¥6.37 in 2023. Indeed, we can see that the analysts are a lot more bearish about Lufax Holding's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Our analysis indicates that LU is potentially undervalued!

It'll come as no surprise then, to learn that the analysts have cut their price target 48% to CN¥19.07. 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 Lufax Holding analyst has a price target of CN¥8.30 per share, while the most pessimistic values it at CN¥1.40. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 20% by the end of 2023. This indicates a significant reduction from annual growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.9% annually for the foreseeable future. It's pretty clear that Lufax Holding'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 Lufax Holding. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Lufax Holding's 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.

That said, the analysts might have good reason to be negative on Lufax Holding, given its declining profit margins. For more information, you can click here to discover this and the 2 other concerns we've identified.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.