The analysts covering China Film Co., Ltd. (SHSE:600977) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, China Film's five analysts are now forecasting revenues of CN¥5.7b in 2025. This would be a huge 38% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 8,298% to CN¥0.34. Before this latest update, the analysts had been forecasting revenues of CN¥6.7b and earnings per share (EPS) of CN¥0.50 in 2025. Indeed, we can see that the analysts are a lot more bearish about China Film's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

What's most unexpected is that the consensus price target rose 8.4% to CN¥10.81, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that China Film is forecast to grow faster in the future than it has in the past, with revenues expected to display 30% annualised growth until the end of 2025. If achieved, this would be a much better result than the 10% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 15% per year. Not only are China Film's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than 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, although our data indicates revenues are expected to perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with China Film's business, like its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs 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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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.