The latest analyst coverage could presage a bad day for Nine Dragons Paper (Holdings) Limited (HKG:2689), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of HK$4.52 reflecting a 44% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After this downgrade, Nine Dragons Paper (Holdings)'s nine analysts are now forecasting revenues of CN¥64b in 2025. This would be a notable 8.0% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 139% to CN¥0.38. Prior to this update, the analysts had been forecasting revenues of CN¥72b and earnings per share (EPS) of CN¥0.43 in 2025. 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¥3.85, suggesting the downgrades are not expected to have a long-term impact on Nine Dragons Paper (Holdings)'s valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Nine Dragons Paper (Holdings) analyst has a price target of CN¥4.65 per share, while the most pessimistic values it at CN¥3.20. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Nine Dragons Paper (Holdings)'s growth to accelerate, with the forecast 8.0% annualised growth to the end of 2025 ranking favourably alongside historical growth of 2.3% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 9.5% per year. Nine Dragons Paper (Holdings) is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

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 Nine Dragons Paper (Holdings). Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Nine Dragons Paper (Holdings) after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Nine Dragons Paper (Holdings) analysts - going out to 2027, and you can see them 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 backed by insiders.

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