Today is shaping up negative for Servyou Software Group Co., Ltd. (SHSE:603171) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the latest consensus from Servyou Software Group's four analysts is for revenues of CN¥2.1b in 2024, which would reflect a notable 18% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 52% to CN¥0.58. Prior to this update, the analysts had been forecasting revenues of CN¥2.4b and earnings per share (EPS) of CN¥0.87 in 2024. Indeed, we can see that the analysts are a lot more bearish about Servyou Software Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 6.1% to CN¥40.96, with the weaker earnings outlook clearly leading analyst valuation estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Servyou Software Group's past performance and to peers in the same industry. The analysts are definitely expecting Servyou Software Group's growth to accelerate, with the forecast 18% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% annually. Servyou Software Group is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. 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.
There might be good reason for analyst bearishness towards Servyou Software Group, like its declining profit margins. Learn more, and discover the 2 other flags we've identified, for 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.