Today is shaping up negative for K. Wah International Holdings Limited (HKG:173) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from K. Wah International Holdings' lone analyst is for revenues of HK$11b in 2022, which would reflect a concerning 44% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to dive 61% to HK$0.45 in the same period. Before this latest update, the analyst had been forecasting revenues of HK$16b and earnings per share (EPS) of HK$0.50 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a sizeable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

Check out our latest analysis for K. Wah International Holdings

Despite the cuts to forecast earnings, there was no real change to the HK$3.84 price target, showing that the analyst don't think the changes have a meaningful impact on its intrinsic value.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the K. Wah International Holdings' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 44% by the end of 2022. This indicates a significant reduction from annual growth of 9.4% 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 8.7% annually for the foreseeable future. It's pretty clear that K. Wah International Holdings' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for K. Wah International Holdings. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that K. Wah International Holdings' revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on K. Wah International Holdings after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2023, which can be seen for 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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