The latest analyst coverage could presage a bad day for Shijiazhuang Shangtai Technology Co., Ltd. (SZSE:001301), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 8.1% to CN¥35.72 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After the downgrade, the two analysts covering Shijiazhuang Shangtai Technology are now predicting revenues of CN¥5.1b in 2024. If met, this would reflect a meaningful 15% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to decrease 7.7% to CN¥2.87 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥6.0b and earnings per share (EPS) of CN¥3.16 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.
It'll come as no surprise then, to learn that the analysts have cut their price target 12% to CN¥51.54.
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. It's pretty clear that there is an expectation that Shijiazhuang Shangtai Technology's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 15% growth on an annualised basis. This is compared to a historical growth rate of 36% over the past five years. Compare this to the 303 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 18% per year. So it's pretty clear that, while Shijiazhuang Shangtai Technology's revenue growth is expected to slow, it's expected to grow roughly in line with the 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 Shijiazhuang Shangtai Technology. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Shijiazhuang Shangtai Technology's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Shijiazhuang Shangtai Technology after today.
That said, the analysts might have good reason to be negative on Shijiazhuang Shangtai Technology, given its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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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