Today is shaping up negative for China Yongda Automobiles Services Holdings Limited (HKG:3669) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. The stock price has risen 8.9% to HK$1.35 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the consensus from China Yongda Automobiles Services Holdings' 17 analysts is for revenues of CN¥64b in 2024, which would reflect a noticeable 5.3% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to reduce 9.3% to CN¥0.13 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥72b and earnings per share (EPS) of CN¥0.31 in 2024. Indeed, we can see that the analysts are a lot more bearish about China Yongda Automobiles Services Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

The consensus price target fell 17% to CN¥2.15, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic China Yongda Automobiles Services Holdings analyst has a price target of CN¥6.21 per share, while the most pessimistic values it at CN¥0.93. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Yongda Automobiles Services Holdings' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 10% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 3.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - China Yongda Automobiles Services Holdings is expected to lag 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that China Yongda Automobiles Services Holdings' revenues are expected to grow 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 China Yongda Automobiles Services Holdings.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for China Yongda Automobiles Services Holdings 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 with high insider ownership.

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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.