The latest analyst coverage could presage a bad day for Brilliance China Automotive Holdings Limited (HKG:1114), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the 22 analysts covering Brilliance China Automotive Holdings provided consensus estimates of CN¥3.7b revenue in 2020, which would reflect a discernible 4.7% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to shrink 4.8% to CN¥1.28 in the same period. Previously, the analysts had been modelling revenues of CN¥4.2b and earnings per share (EPS) of CN¥1.39 in 2020. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.
Analysts made no major changes to their price target of CN¥7.91, suggesting the downgrades are not expected to have a long-term impact on Brilliance China Automotive Holdings'valuation. 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 Brilliance China Automotive Holdings, with the most bullish analyst valuing it at CN¥12.82 and the most bearish at CN¥5.08 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. We would also point out that the forecast 4.7% revenue decline is roughly in line with the historical trend, which saw revenues shrink -5.4% annually over the past five years Compare this with our data on other companies (with analyst coverage) in the industry, which in aggregate are forecast to see their revenue grow 6.6% next year. So it looks like Brilliance China Automotive Holdings' revenues are expected to decline at a slower rate 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 Brilliance China Automotive Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Brilliance China Automotive Holdings going forwards.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Brilliance China Automotive Holdings analysts - going out to 2022, 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 that insiders are buying.
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