Today is shaping up negative for Taiji Computer Corporation Limited (SZSE:002368) 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 six analysts covering Taiji Computer are now predicting revenues of CN¥11b in 2024. If met, this would reflect a solid 16% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 40% to CN¥0.84. Before this latest update, the analysts had been forecasting revenues of CN¥13b and earnings per share (EPS) of CN¥0.98 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

The consensus price target fell 7.9% to CN¥37.27, with the weaker earnings outlook clearly leading analyst valuation estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Taiji Computer's past performance and to peers in the same industry. The analysts are definitely expecting Taiji Computer's growth to accelerate, with the forecast 16% annualised growth to the end of 2024 ranking favourably alongside historical growth of 11% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 18% per year. Taiji Computer is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

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 Taiji Computer. 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. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Taiji Computer's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Taiji Computer after today.

That said, the analysts might have good reason to be negative on Taiji Computer, given concerns around earnings quality. Learn more, and discover the 1 other risk we've identified, 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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