The analyst covering Shaanxi Construction Machinery Co.,Ltd (SHSE:600984) 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 the analyst seeing grey clouds on the horizon.

After the downgrade, the consensus from Shaanxi Construction MachineryLtd's solo analyst is for revenues of CN¥3.0b in 2023, which would reflect an uneasy 14% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching CN¥0.44 per share. Yet prior to the latest estimates, the analyst had been forecasting revenues of CN¥3.5b and losses of CN¥0.19 per share in 2023. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Shaanxi Construction MachineryLtd

The consensus price target fell 13% to CN¥4.70, implicitly signalling that lower earnings per share are a leading indicator for Shaanxi Construction MachineryLtd's valuation.

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. We would highlight that sales are expected to reverse, with a forecast 14% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 10% 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 21% annually for the foreseeable future. It's pretty clear that Shaanxi Construction MachineryLtd's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Shaanxi Construction MachineryLtd. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2025, which can be seen for 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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