Downgrade: Here's How Analysts See GCL-Poly Energy Holdings Limited (HKG:3800) Performing In The Near Term
One thing we could say about the analysts on GCL-Poly Energy Holdings Limited (HKG:3800) - 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At CN¥0.25, shares are up 4.6% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
After the downgrade, the consensus from GCL-Poly Energy Holdings' eight analysts is for revenues of CN¥18b in 2020, which would reflect a measurable 6.5% decline in sales compared to the last year of performance. Losses are supposed to balloon 156% to CN¥0.027 per share. Previously, the analysts had been modelling revenues of CN¥21b and earnings per share (EPS) of CN¥0.031 in 2020. There looks to have been a major change in sentiment regarding GCL-Poly Energy Holdings' prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.
See our latest analysis for GCL-Poly Energy Holdings
The consensus price target fell 19% to CN¥0.37, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic GCL-Poly Energy Holdings analyst has a price target of CN¥1.48 per share, while the most pessimistic values it at CN¥0.15. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One more thing stood out to us about these estimates, and it's the idea that GCL-Poly Energy Holdings'decline is expected to accelerate, with revenues forecast to fall 6.5% next year, topping off a historical decline of 0.1% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 15% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect GCL-Poly Energy Holdings to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting GCL-Poly Energy Holdings to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of GCL-Poly Energy Holdings.
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 GCL-Poly Energy Holdings' business, like dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns we've identified, for 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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