Today is shaping up negative for Sunac Services Holdings Limited (HKG:1516) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, Sunac Services Holdings' 19 analysts currently expect revenues in 2022 to be CN¥8.5b, approximately in line with the last 12 months. Losses are supposed to balloon 78% to CN¥0.062 per share. Previously, the analysts had been modelling revenues of CN¥10b and earnings per share (EPS) of CN¥0.57 in 2022. So we can see that the consensus has become notably more bearish on Sunac Services Holdings' outlook with these numbers, making a measurable cut 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 Sunac Services Holdings

The consensus price target fell 21% to HK$5.42, implicitly signalling that lower earnings per share are a leading indicator for Sunac Services Holdings' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Sunac Services Holdings at HK$15.80 per share, while the most bearish prices it at HK$1.60. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 1.3% by the end of 2022. This indicates a significant reduction from annual growth of 39% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sunac Services Holdings is expected to lag the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Sunac Services Holdings dropped from profits to a loss this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sunac Services 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 Sunac Services Holdings.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Sunac Services Holdings' financials, such as the risk of cutting its dividend. Learn more, and discover the 1 other warning sign we've identified, 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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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.