The latest analyst coverage could presage a bad day for Impro Precision Industries Limited (HKG:1286), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 7.5% to HK$2.57 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the consensus from solo analyst covering Impro Precision Industries is for revenues of HK$2.7b in 2020, implying a substantial 26% decline in sales compared to the last 12 months. Before the latest update, the analyst was foreseeing HK$3.4b of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on Impro Precision Industries, given the pretty serious reduction to revenue estimates.
Notably, the analyst has cut their price target 21% to HK$2.20, suggesting concerns around Impro Precision Industries' valuation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 26%, a significant reduction from annual growth of 12% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.1% next year. It's pretty clear that Impro Precision Industries' 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 revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Impro Precision Industries after today.
Still got questions? One Impro Precision Industries broker/analyst has provided estimates out to 2022, which can be seen for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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