The latest analyst coverage could presage a bad day for BOE Varitronix Limited (HKG:710), 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 the analysts seeing grey clouds on the horizon.
Following the downgrade, the latest consensus from BOE Varitronix's eight analysts is for revenues of HK$13b in 2024, which would reflect a notable 19% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to expand 16% to HK$0.70. Prior to this update, the analysts had been forecasting revenues of HK$15b and earnings per share (EPS) of HK$0.95 in 2024. Indeed, we can see that the analysts are a lot more bearish about BOE Varitronix's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 23% to HK$10.34.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that BOE Varitronix's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 19% growth on an annualised basis. This is compared to a historical growth rate of 29% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 13% per year. Even after the forecast slowdown in growth, it seems obvious that BOE Varitronix is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of BOE Varitronix.
Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on BOE Varitronix that suggests the company could be somewhat overvalued. Find out why, and see how we estimate the valuation 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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