One thing we could say about the covering analyst on First Pacific Company Limited (HKG:142) - 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. Surprisingly the share price has been buoyant, rising 11% to US$1.44 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
After the downgrade, the consensus from First Pacific's solo analyst is for revenues of US$6.8b in 2020, which would reflect a not inconsiderable 16% decline in sales compared to the last year of performance. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.058 per share this year. Prior to this update, the analyst had been forecasting revenues of US$8.6b and earnings per share (EPS) of US$0.08 in 2020. Indeed, we can see that the analyst is a lot more bearish about First Pacific's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analyst has cut their price target 56% to US$0.20.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 4.6% 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 11% annually for the foreseeable future. It's pretty clear that First Pacific's revenues are expected to perform substantially worse than the wider industry.
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. 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 First Pacific.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2022, which can be seen 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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