One thing we could say about the analysts on Geely Automobile Holdings Limited (HKG:175) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the 28 analysts covering Geely Automobile Holdings, is for revenues of CN¥94b in 2020, which would reflect a small 6.8% reduction in Geely Automobile Holdings' sales over the past 12 months. Statutory earnings per share are supposed to sink 13% to CN¥0.95 in the same period. Previously, the analysts had been modelling revenues of CN¥105b and earnings per share (EPS) of CN¥1.15 in 2020. Indeed, we can see that the analysts are a lot more bearish about Geely Automobile Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of CN¥13.47, suggesting the downgrades are not expected to have a long-term impact on Geely Automobile Holdings'valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Geely Automobile Holdings, with the most bullish analyst valuing it at CN¥18.31 and the most bearish at CN¥7.22 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 6.8%, a significant reduction from annual growth of 35% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.1% next year. It's pretty clear that Geely Automobile Holdings' revenues are expected to perform substantially worse than 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 Geely Automobile Holdings. 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 Geely Automobile Holdings.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Geely Automobile Holdings going out to 2022, 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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