One Dream International Limited (HKG:1126) Analyst Just Cut Their EPS Forecasts
Today is shaping up negative for Dream International Limited (HKG:1126) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon. The stock price has risen 5.2% to HK$3.04 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following this downgrade, Dream International's lone analyst are forecasting 2020 revenues to be HK$4.0b, approximately in line with the last 12 months. Statutory earnings per share are supposed to decline 20% to HK$0.59 in the same period. Prior to this update, the analyst had been forecasting revenues of HK$4.8b and earnings per share (EPS) of HK$0.71 in 2020. 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.
Check out our latest analysis for Dream International
The consensus price target fell 11% to HK$4.00, with the weaker earnings outlook clearly leading analyst valuation estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Dream International's revenue growth is expected to slow, with forecast 1.6% increase next year well below the historical 20% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Dream International.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Dream International.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2022, which can be seen 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 that insiders are buying.
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