The analysts covering Guangdong Tapai Group Co., Ltd. (SZSE:002233) 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 analysts seeing grey clouds on the horizon. At CN¥7.49, shares are up 5.3% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the current consensus from Guangdong Tapai Group's four analysts is for revenues of CN¥4.9b in 2024 which - if met - would reflect a reasonable 5.0% increase on its sales over the past 12 months. Statutory earnings per share are presumed to surge 39% to CN¥0.59. Before this latest update, the analysts had been forecasting revenues of CN¥5.5b and earnings per share (EPS) of CN¥0.69 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

Analysts made no major changes to their price target of CN¥8.60, suggesting the downgrades are not expected to have a long-term impact on Guangdong Tapai Group's valuation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Guangdong Tapai Group's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Guangdong Tapai Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.0% annualised growth until the end of 2024. If achieved, this would be a much better result than the 4.9% 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 8.0% annually for the foreseeable future. So although Guangdong Tapai Group's revenue growth is expected to improve, it is still expected to grow slower than the 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 Guangdong Tapai Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Guangdong Tapai Group's revenues are expected to grow 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 Guangdong Tapai Group.

After a downgrade like this one, it's pretty clear that previous forecasts were too optimistic. Worse, it's possible that the forecast future income could struggle to cover Guangdong Tapai Group'sdividend payments. For more information, you can click here to learn more about our dividend analysis and the 1 potential risk we've identified.

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 with high insider ownership.

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