One thing we could say about the covering analyst on Star Plus Legend Holdings Limited (HKG:6683) - 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) 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 latest consensus from Star Plus Legend Holdings' solo analyst is for revenues of CN¥660m in 2024, which would reflect a huge 53% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 238% to CN¥0.14. Prior to this update, the analyst had been forecasting revenues of CN¥927m and earnings per share (EPS) of CN¥0.25 in 2024. Indeed, we can see that the analyst is a lot more bearish about Star Plus Legend Holdings' prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Star Plus Legend Holdings
The average price target climbed 78% to HK$13.90 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Star Plus Legend Holdings is forecast to grow faster in the future than it has in the past, with revenues expected to display 53% annualised growth until the end of 2024. If achieved, this would be a much better result than the 3.0% annual decline over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 6.9% annually. So it looks like Star Plus Legend Holdings is expected to grow faster than its competitors, at least for a while.
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. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Star Plus Legend Holdings.
That said, this analyst might have good reason to be negative on Star Plus Legend Holdings, given concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk 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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