The analysts covering Country Garden Holdings Company Limited (HKG:2007) 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.

Following the latest downgrade, the current consensus, from the 18 analysts covering Country Garden Holdings, is for revenues of CN¥436b in 2022, which would reflect a noticeable 3.2% reduction in Country Garden Holdings' sales over the past 12 months. Statutory earnings per share are presumed to shoot up 22% to CN¥0.63. Previously, the analysts had been modelling revenues of CN¥503b and earnings per share (EPS) of CN¥1.06 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Country Garden Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 25% to CN¥3.40. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Country Garden Holdings analyst has a price target of CN¥7.89 per share, while the most pessimistic values it at CN¥2.00. 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.

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 6.4% by the end of 2022. This indicates a significant reduction from annual growth of 16% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Country Garden Holdings is expected to lag the wider 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 Country Garden Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Country Garden Holdings' 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 Country Garden Holdings.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Country Garden Holdings' business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other concerns we've identified.

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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.