Cango Inc. (NYSE:CANG) Analysts Just Slashed This Year's Estimates

By
Simply Wall St
Published
March 15, 2022
NYSE:CANG
Source: Shutterstock

One thing we could say about the analysts on Cango Inc. (NYSE:CANG) - 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Cango's dual analysts are now forecasting revenues of CN¥4.5b in 2022. This would be a meaningful 14% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching CN¥0.11 per share. Before this latest update, the analysts had been forecasting revenues of CN¥5.0b and earnings per share (EPS) of CN¥1.11 in 2022. So we can see that the consensus has become notably more bearish on Cango's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

Check out our latest analysis for Cango

earnings-and-revenue-growth
NYSE:CANG Earnings and Revenue Growth March 15th 2022

The consensus price target fell 23% to CN¥30.06, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Cango at CN¥6.48 per share, while the most bearish prices it at CN¥4.83. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Cango is an easy business to forecast or the underlying assumptions are obvious.

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. It's pretty clear that there is an expectation that Cango's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 14% growth on an annualised basis. This is compared to a historical growth rate of 36% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 14% annually. Factoring in the forecast slowdown in growth, it looks like Cango is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Cango dropped from profits to a loss this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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. We have analyst estimates for Cango going out as far as 2023, 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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.