The analysts covering Linklogis Inc. (HKG:9959) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, Linklogis' five analysts currently expect revenues in 2022 to be CN¥1.2b, approximately in line with the last 12 months. Statutory earnings per share are presumed to bounce 172% to CN¥0.10. Prior to this update, the analysts had been forecasting revenues of CN¥1.3b and earnings per share (EPS) of CN¥0.12 in 2022. 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.

Check out our latest analysis for Linklogis

The consensus price target fell 14% to HK$8.55, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Linklogis, with the most bullish analyst valuing it at HK$10.60 and the most bearish at HK$6.64 per share. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Linklogis' revenue growth is expected to slow, with the forecast 1.2% annualised growth rate until the end of 2022 being well below the historical 15% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 26% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Linklogis.

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 Linklogis. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Linklogis' 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.

Uncomfortably, our automated valuation tool also suggests that Linklogis stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. Learn why, and examine the assumptions that underpin our valuation by visiting our free platform here to learn more about our valuation approach.

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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