Today is shaping up negative for China MeiDong Auto Holdings Limited (HKG:1268) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At HK$1.72, shares are up 4.9% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the latest downgrade, the current consensus, from the ten analysts covering China MeiDong Auto Holdings, is for revenues of CN¥22b in 2024, which would reflect a definite 11% reduction in China MeiDong Auto Holdings' sales over the past 12 months. Per-share earnings are expected to soar 20% to CN¥0.066. Before this latest update, the analysts had been forecasting revenues of CN¥27b and earnings per share (EPS) of CN¥0.24 in 2024. Indeed, we can see that the analysts are a lot more bearish about China MeiDong Auto Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for China MeiDong Auto Holdings
It'll come as no surprise then, to learn that the analysts have cut their price target 9.3% to CN¥3.06. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values China MeiDong Auto Holdings at CN¥7.52 per share, while the most bearish prices it at CN¥1.64. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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 21% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.9% annually for the foreseeable future. It's pretty clear that China MeiDong Auto Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for China MeiDong Auto Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of China MeiDong Auto Holdings.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for China MeiDong Auto Holdings going out to 2026, and you can see them free on our platform here.
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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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.