One thing we could say about the analysts on Central China Management Company Limited (HKG:9982) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. The stock price has risen 6.8% to HK$0.78 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, Central China Management's two analysts currently expect revenues in 2022 to be CN¥1.0b, approximately in line with the last 12 months. Statutory earnings per share are anticipated to shrink 3.4% to CN¥0.18 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥1.2b and earnings per share (EPS) of CN¥0.23 in 2022. Indeed, we can see that the analysts are a lot more bearish about Central China Management's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Central China Management

The consensus price target fell 13% to CN¥2.00, 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. Currently, the most bullish analyst values Central China Management at CN¥2.95 per share, while the most bearish prices it at CN¥1.61. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2022 compared to the historical decline of 19% per annum over the past year. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 8.5% annually. So while a broad number of companies are forecast to grow, unfortunately Central China Management 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 Central China Management. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Central China Management's revenues are expected to grow 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 Central China Management.

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 Central China Management 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.