Investors in Yunnan Energy New Material Co., Ltd. (SZSE:002812) had a good week, as its shares rose 6.0% to close at CN¥26.91 following the release of its second-quarter results. Revenues were CN¥2.5b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of CN¥0.15 were also better than expected, beating analyst predictions by 13%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Following last week's earnings report, Yunnan Energy New Material's 16 analysts are forecasting 2024 revenues to be CN¥11.2b, approximately in line with the last 12 months. Statutory earnings per share are forecast to crater 45% to CN¥0.81 in the same period. In the lead-up to this report, the analysts had been modelling revenues of CN¥13.1b and earnings per share (EPS) of CN¥1.81 in 2024. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a pretty serious reduction to earnings per share numbers as well.

The analysts made no major changes to their price target of CN¥40.50, suggesting the downgrades are not expected to have a long-term impact on Yunnan Energy New Material's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Yunnan Energy New Material analyst has a price target of CN¥68.00 per share, while the most pessimistic values it at CN¥19.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that revenue is expected to reverse, with a forecast 1.2% annualised decline to the end of 2024. That is a notable change from historical growth of 30% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Yunnan Energy New Material is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Yunnan Energy New Material. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Yunnan Energy New Material going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Yunnan Energy New Material you should be aware of, and 2 of them can't be ignored.

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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.