The latest analyst coverage could presage a bad day for China ZhengTong Auto Services Holdings Limited (HKG:1728), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

Following the downgrade, the consensus from single analyst covering China ZhengTong Auto Services Holdings is for revenues of CN¥20b in 2024, implying a definite 9.8% decline in sales compared to the last 12 months. Losses are supposed to balloon 29% to CN¥0.46 per share. Yet before this consensus update, the analyst had been forecasting revenues of CN¥27b and losses of CN¥0.20 per share in 2024. 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.

The consensus price target fell 69% to CN¥0.064, implicitly signalling that lower earnings per share are a leading indicator for China ZhengTong Auto Services Holdings' 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. One more thing stood out to us about these estimates, and it's the idea that China ZhengTong Auto Services Holdings' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 9.8% to the end of 2024. This tops off a historical decline of 7.7% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 10% annually. So it's pretty clear that, while it does have declining revenues, the analyst also expect China ZhengTong Auto Services Holdings to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of China ZhengTong Auto Services Holdings.

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 2026, which can be seen for 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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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.