The analysts covering NagaCorp Ltd. (HKG:3918) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of HK$3.37 reflecting a 12% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the most recent consensus for NagaCorp from its five analysts is for revenues of US$666m in 2024 which, if met, would be a major 33% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 37% to US$0.055. Before this latest update, the analysts had been forecasting revenues of US$775m and earnings per share (EPS) of US$0.068 in 2024. Indeed, we can see that the analysts are a lot more bearish about NagaCorp's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

The consensus price target fell 30% to US$0.51, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 NagaCorp analyst has a price target of US$0.72 per share, while the most pessimistic values it at US$0.38. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. One thing stands out from these estimates, which is that NagaCorp is forecast to grow faster in the future than it has in the past, with revenues expected to display 33% annualised growth until the end of 2024. If achieved, this would be a much better result than the 36% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 16% annually. Not only are NagaCorp's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of NagaCorp.

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 NagaCorp going out to 2026, 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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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.