One thing we could say about the analysts on Guangzhou R&F Properties Co., Ltd. (HKG:2777) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the eight analysts covering Guangzhou R&F Properties provided consensus estimates of CN¥50b revenue in 2022, which would reflect a chunky 8.2% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 76% to CN¥1.72. Before this latest update, the analysts had been forecasting revenues of CN¥76b and earnings per share (EPS) of CN¥3.37 in 2022. So we can see that the consensus has become notably more bearish on Guangzhou R&F Properties' outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

See our latest analysis for Guangzhou R&F Properties

The consensus price target fell 22% to CN¥2.62, 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 Guangzhou R&F Properties at CN¥8.44 per share, while the most bearish prices it at CN¥1.22. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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 16% by the end of 2022. This indicates a significant reduction from annual growth of 4.9% 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 8.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Guangzhou R&F Properties is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Guangzhou R&F Properties to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Guangzhou R&F Properties' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Guangzhou R&F Properties after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Guangzhou R&F Properties analysts - going out to 2024, and you can see them free on our platform here.

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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.