The analysts covering Huafon Chemical Co., Ltd. (SZSE:002064) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this 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. The stock price has risen 4.5% to CN¥7.21 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the downgrade, the consensus from three analysts covering Huafon Chemical is for revenues of CN¥21b in 2023, implying an uneasy 16% decline in sales compared to the last 12 months. Per-share earnings are expected to swell 19% to CN¥0.56. Previously, the analysts had been modelling revenues of CN¥24b and earnings per share (EPS) of CN¥0.63 in 2023. 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.
Check out our latest analysis for Huafon Chemical
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 30% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 17% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 19% per year. It's pretty clear that Huafon Chemical's revenues are expected to perform substantially worse 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, and industry data suggests that Huafon Chemical's revenues are expected to grow slower than the wider market. After a cut like that, investors could be forgiven for thinking analysts are a lot more bearish on Huafon Chemical, and a few readers might choose to steer clear of the stock.
There might be good reason for analyst bearishness towards Huafon Chemical, like concerns around earnings quality. For more information, you can click here to discover this and the 2 other concerns we've identified.
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 that insiders are buying.
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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.
