Market forces rained on the parade of Pacific Textiles Holdings Limited (HKG:1382) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following this downgrade, Pacific Textiles Holdings' three analysts are forecasting 2024 revenues to be HK$5.0b, approximately in line with the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of HK$6.3b in 2024. The consensus view seems to have become more pessimistic on Pacific Textiles Holdings, noting the substantial drop in revenue estimates in this update.
View our latest analysis for Pacific Textiles Holdings
SEHK:1382 Earnings and Revenue Growth June 28th 2023
The consensus price target fell 6.9% to HK$3.63, with the analysts clearly less optimistic about Pacific Textiles Holdings' valuation following this update. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Pacific Textiles Holdings analyst has a price target of HK$4.90 per share, while the most pessimistic values it at HK$2.90. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast out to 2024. That would be a definite improvement, given that the past five years have seen sales shrink 2.4% annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. Although Pacific Textiles Holdings' revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Pacific Textiles Holdings this year. They're also anticipating slower revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Pacific Textiles Holdings going forwards.
Still got questions? We have estimates for Pacific Textiles Holdings from its three analysts out until 2026, 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.