Today is shaping up negative for Ruitai Materials Technology Co., Ltd. (SZSE:002066) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for Ruitai Materials Technology from its one analyst is for revenues of CN¥5.0b in 2024 which, if met, would be a meaningful 8.7% increase on its sales over the past 12 months. Statutory earnings per share are presumed to step up 11% to CN¥0.35. Prior to this update, the analyst had been forecasting revenues of CN¥5.7b and earnings per share (EPS) of CN¥0.43 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
It'll come as no surprise then, to learn that the analyst has cut their price target 29% to CN¥8.70.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Ruitai Materials Technology's rate of growth is expected to accelerate meaningfully, with the forecast 8.7% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 5.0% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Ruitai Materials Technology is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Ruitai Materials Technology.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Ruitai Materials Technology going out as far as 2026, 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 that insiders are buying.
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