The analyst covering Archosaur Games Inc. (HKG:9990) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Archosaur Games' sole analyst is for revenues of CN¥900m in 2022, which would reflect a perceptible 2.3% decline in sales compared to the last year of performance. Per-share losses are expected to see a sharp uptick, reaching CN¥0.42. Before this latest update, the analyst had been forecasting revenues of CN¥2.2b and earnings per share (EPS) of CN¥0.57 in 2022. So we can see that the consensus has become notably more bearish on Archosaur Games' outlook with these numbers, making a pretty serious reduction 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.

View our latest analysis for Archosaur Games

The consensus price target fell 19% to CN¥6.61, implicitly signalling that lower earnings per share are a leading indicator for Archosaur Games' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Archosaur Games analyst has a price target of CN¥8.58 per share, while the most pessimistic values it at CN¥6.00. 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 Archosaur Games shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.3% by the end of 2022. This indicates a significant reduction from annual growth of 1.5% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 18% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Archosaur Games is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analyst is expecting Archosaur Games 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. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Archosaur Games.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Archosaur Games going out as far as 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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