Shareholders in Guangzhou Automobile Group Co., Ltd. (HKG:2238) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Guangzhou Automobile Group will make substantially more sales than they'd previously expected.

Following the upgrade, the current consensus from Guangzhou Automobile Group's 20 analysts is for revenues of CN¥98b in 2022 which - if met - would reflect a meaningful 9.6% increase on its sales over the past 12 months. Statutory earnings per share are presumed to swell 15% to CN¥0.96. Prior to this update, the analysts had been forecasting revenues of CN¥89b and earnings per share (EPS) of CN¥0.90 in 2022. The most recent forecasts are noticeably more optimistic, with a nice gain to revenue estimates and a lift to earnings per share as well.

Check out our latest analysis for Guangzhou Automobile Group

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥8.61, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Guangzhou Automobile Group, with the most bullish analyst valuing it at CN¥12.71 and the most bearish at CN¥5.71 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. It's clear from the latest estimates that Guangzhou Automobile Group's rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 2.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% annually. Guangzhou Automobile Group is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue forecasts, although the latest estimates suggest that Guangzhou Automobile Group will grow in line with the overall market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Guangzhou Automobile Group.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential warning sign with Guangzhou Automobile Group, including concerns around earnings quality. For more information, you can click through to our platform to learn more about this and the 1 other warning sign we've identified .

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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