One thing we could say about the analysts on IMAX China Holding, Inc. (HKG:1970) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the two analysts covering IMAX China Holding provided consensus estimates of US$91m revenue in 2022, which would reflect a considerable 19% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 38% to US$0.07 in the same period. Prior to this update, the analysts had been forecasting revenues of US$107m and earnings per share (EPS) of US$0.09 in 2022. Indeed, we can see that the analysts are a lot more bearish about IMAX China Holding's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for IMAX China Holding

The consensus price target fell 10% to US$1.38, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. The most optimistic IMAX China Holding analyst has a price target of US$11.60 per share, while the most pessimistic values it at US$10.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 7.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 19% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 16% annually. So while a broad number of companies are forecast to grow, unfortunately IMAX China Holding is expected to see its sales affected worse than other companies in the 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 IMAX China Holding. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that IMAX China Holding's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of IMAX China Holding.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2024, which can be seen for 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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