Today is shaping up negative for Yuneng Technology Co., Ltd. (SHSE:688348) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Yuneng Technology's four analysts are now forecasting revenues of CN¥3.6b in 2024. This would be a huge 161% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 213% to CN¥8.05. Prior to this update, the analysts had been forecasting revenues of CN¥4.1b and earnings per share (EPS) of CN¥9.02 in 2024. Indeed, we can see that the analysts are a lot more bearish about Yuneng Technology's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Yuneng Technology

Analysts made no major changes to their price target of CN¥169, suggesting the downgrades are not expected to have a long-term impact on Yuneng Technology's valuation.

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. The analysts are definitely expecting Yuneng Technology's growth to accelerate, with the forecast 115% annualised growth to the end of 2024 ranking favourably alongside historical growth of 31% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 23% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Yuneng Technology is expected to grow much faster than its 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 Yuneng Technology. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Yuneng Technology after the downgrade.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Yuneng Technology's business, like concerns around earnings quality. Learn more, and discover the 2 other warning signs 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 that insiders are buying.

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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.