The analysts covering Xiamen Faratronic Co., Ltd. (SHSE:600563) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for Xiamen Faratronic from its ten analysts is for revenues of CN¥4.6b in 2024 which, if met, would be a notable 20% increase on its sales over the past 12 months. Statutory earnings per share are presumed to expand 17% to CN¥5.32. Prior to this update, the analysts had been forecasting revenues of CN¥5.4b and earnings per share (EPS) of CN¥6.21 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
Analysts made no major changes to their price target of CN¥134, suggesting the downgrades are not expected to have a long-term impact on Xiamen Faratronic's valuation.
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. We can infer from the latest estimates that forecasts expect a continuation of Xiamen Faratronic'shistorical trends, as the 20% annualised revenue growth to the end of 2024 is roughly in line with the 22% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 18% per year. So although Xiamen Faratronic is expected to maintain its revenue growth rate, it's only growing at about the rate of 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Xiamen Faratronic after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Xiamen Faratronic analysts - going out to 2026, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.