Today is shaping up negative for Guangdong Huate Gas Co., Ltd (SHSE:688268) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the seven analysts covering Guangdong Huate Gas are now predicting revenues of CN¥1.9b in 2024. If met, this would reflect a substantial 27% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 61% to CN¥2.21. Before this latest update, the analysts had been forecasting revenues of CN¥2.1b and earnings per share (EPS) of CN¥2.28 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a minor downgrade to earnings per share numbers as well.
The consensus price target fell 6.5% to CN¥75.31, with the weaker earnings outlook clearly leading analyst valuation estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Guangdong Huate Gas' growth to accelerate, with the forecast 27% annualised growth to the end of 2024 ranking favourably alongside historical growth of 18% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Guangdong Huate Gas to grow faster than 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 Guangdong Huate Gas. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 Guangdong Huate Gas going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Guangdong Huate Gas 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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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.