The latest analyst coverage could presage a bad day for Shenzhen KSTAR Science and Technology Co., Ltd. (SZSE:002518), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After this downgrade, Shenzhen KSTAR Science and Technology's six analysts are now forecasting revenues of CN¥5.7b in 2024. This would be a meaningful 18% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 31% to CN¥1.67. Prior to this update, the analysts had been forecasting revenues of CN¥6.7b and earnings per share (EPS) of CN¥1.74 in 2024. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

Analysts made no major changes to their price target of CN¥25.70, suggesting the downgrades are not expected to have a long-term impact on Shenzhen KSTAR Science and Technology's valuation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Shenzhen KSTAR Science and Technology's rate of growth is expected to accelerate meaningfully, with the forecast 25% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 19% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Shenzhen KSTAR Science and Technology is expected to grow much faster than its industry.

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 Shenzhen KSTAR Science and Technology. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Shenzhen KSTAR Science and Technology going forwards.

That said, the analysts might have good reason to be negative on Shenzhen KSTAR Science and Technology, given concerns around earnings quality. Learn more, and discover the 1 other concern we've identified, for 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.

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