The analysts covering Sunac China Holdings Limited (HKG:1918) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. The stock price has risen 5.4% to HK$0.98 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the consensus from Sunac China Holdings' three analysts is for revenues of CN¥107b in 2024, which would reflect a definite 17% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 63% to CN¥0.33. Yet before this consensus update, the analysts had been forecasting revenues of CN¥120b and losses of CN¥0.27 per share in 2024. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

The consensus price target was broadly unchanged at CN¥0.99, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Sunac China Holdings analyst has a price target of CN¥1.39 per share, while the most pessimistic values it at CN¥0.46. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. Over the past five years, revenues have declined around 8.8% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 17% decline in revenue until the end of 2024. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.0% per year. So while a broad number of companies are forecast to grow, unfortunately Sunac China Holdings is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Sunac China Holdings.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Sunac China Holdings, including recent substantial insider selling. Learn more, and discover the 1 other warning sign we've identified, for 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 backed by insiders.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.