One thing we could say about the analysts on Zhejiang Zhengte Co., Ltd. (SZSE:001238) - 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 analysts have soured majorly on the business. Shares are up 7.4% to CN¥28.15 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following this downgrade, Zhejiang Zhengte's two analysts are forecasting 2024 revenues to be CN¥1.2b, approximately in line with the last 12 months. Statutory earnings per share are presumed to leap 289% to CN¥0.52. Previously, the analysts had been modelling revenues of CN¥1.3b and earnings per share (EPS) of CN¥1.01 in 2024. Indeed, we can see that the analysts are a lot more bearish about Zhejiang Zhengte's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Zhejiang Zhengte's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 1.8% growth on an annualised basis. This is compared to a historical growth rate of 5.2% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.4% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Zhejiang Zhengte.

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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the serious cut to this year's outlook, it's clear that analysts have turned more bearish on Zhejiang Zhengte, and we wouldn't blame shareholders for feeling a little more cautious themselves.

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 Zhejiang Zhengte's business, like concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk 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 backed by insiders.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.