Today is shaping up negative for Canvest Environmental Protection Group Company Limited (HKG:1381) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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. At HK$4.11, shares are up 4.1% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
After this downgrade, Canvest Environmental Protection Group's six analysts are now forecasting revenues of HK$5.3b in 2024. This would be an okay 5.5% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 20% to HK$0.49. Before this latest update, the analysts had been forecasting revenues of HK$6.1b and earnings per share (EPS) of HK$0.58 in 2024. Indeed, we can see that the analysts are a lot more bearish about Canvest Environmental Protection Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of HK$4.76, suggesting the downgrades are not expected to have a long-term impact on Canvest Environmental Protection Group's valuation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Canvest Environmental Protection Group's revenue growth is expected to slow, with the forecast 5.5% annualised growth rate until the end of 2024 being well below the historical 15% p.a. growth over the last five years. Compare this to the 24 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 5.5% per year. Factoring in the forecast slowdown in growth, it looks like Canvest Environmental Protection Group is forecast to grow at about the same rate as 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 Canvest Environmental Protection Group. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 Canvest Environmental Protection Group 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 Canvest Environmental Protection Group analysts - going out to 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.
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