The analysts covering Shenzhen Sunway Communication Co., Ltd. (SZSE:300136) 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 analysts seeing grey clouds on the horizon. The stock price has risen 5.8% to CN¥18.66 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the latest consensus from Shenzhen Sunway Communication's dual analysts is for revenues of CN¥8.6b in 2024, which would reflect a decent 12% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 30% to CN¥0.71. Previously, the analysts had been modelling revenues of CN¥10b and earnings per share (EPS) of CN¥1.02 in 2024. Indeed, we can see that the analysts are a lot more bearish about Shenzhen Sunway Communication's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

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. It's clear from the latest estimates that Shenzhen Sunway Communication's rate of growth is expected to accelerate meaningfully, with the forecast 17% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 11% 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 22% per year. So it's clear that despite the acceleration in growth, Shenzhen Sunway Communication is expected to grow meaningfully slower than the industry average.

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 Sunway Communication. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Shenzhen Sunway Communication's revenues are expected to grow slower than the wider market. Given the serious cut to this year's outlook, it's clear that analysts have turned more bearish on Shenzhen Sunway Communication, and we wouldn't blame shareholders for feeling a little more cautious themselves.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Shenzhen Sunway Communication going out as far as 2025, and you can see them 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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