One thing we could say about the analysts on Guangzhou R&F Properties Co., Ltd. (HKG:2777) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from two analysts covering Guangzhou R&F Properties is for revenues of CN¥17b in 2024, implying a stressful 54% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 74% to CN¥1.38 per share. However, before this estimates update, the consensus had been expecting revenues of CN¥29b and CN¥0.87 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

There was no major change to the consensus price target of CN¥0.93, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Guangzhou R&F Properties, with the most bullish analyst valuing it at CN¥1.12 and the most bearish at CN¥0.74 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. Over the past five years, revenues have declined around 17% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 54% decline in revenue until the end of 2024. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.3% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Guangzhou R&F Properties to suffer 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 Guangzhou R&F Properties. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Guangzhou R&F Properties.

Still, the long-term prospects of the business are much more relevant than next year's earnings. 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 that insiders are buying.

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