The latest analyst coverage could presage a bad day for Western Superconducting Technologies Co., Ltd. (SHSE:688122), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the latest consensus from Western Superconducting Technologies' five analysts is for revenues of CN¥4.4b in 2023, which would reflect a decent 8.3% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to leap 21% to CN¥1.49. Before this latest update, the analysts had been forecasting revenues of CN¥5.1b and earnings per share (EPS) of CN¥1.70 in 2023. Indeed, we can see that the analysts are a lot more bearish about Western Superconducting Technologies' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for Western Superconducting Technologies
Analysts made no major changes to their price target of CN¥57.66, suggesting the downgrades are not expected to have a long-term impact on Western Superconducting Technologies' valuation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Western Superconducting Technologies' revenue growth is expected to slow, with the forecast 17% annualised growth rate until the end of 2023 being well below the historical 30% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% per year. So it's pretty clear that, while Western Superconducting Technologies' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
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 Western Superconducting Technologies. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Western Superconducting Technologies after the downgrade.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Western Superconducting Technologies analysts - going out to 2025, 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.
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