The latest analyst coverage could presage a bad day for Sinotruk Jinan Truck Co., Ltd. (SZSE:000951), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, Sinotruk Jinan Truck's three analysts are now forecasting revenues of CN¥46b in 2022. This would be an okay 6.5% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 63% to CN¥0.78. Prior to this update, the analysts had been forecasting revenues of CN¥57b and earnings per share (EPS) of CN¥0.90 in 2022. Indeed, we can see that the analysts are a lot more bearish about Sinotruk Jinan Truck's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Sinotruk Jinan Truck

Despite the cuts to forecast earnings, there was no real change to the CN¥13.45 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Sinotruk Jinan Truck at CN¥16.00 per share, while the most bearish prices it at CN¥10.90. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Sinotruk Jinan Truck shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Sinotruk Jinan Truck's revenue growth is expected to slow, with the forecast 8.7% annualised growth rate until the end of 2022 being well below the historical 14% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 19% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Sinotruk Jinan Truck.

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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sinotruk Jinan Truck's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Sinotruk Jinan Truck.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Sinotruk Jinan Truck going out to 2024, 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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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.