It's shaping up to be a tough period for S-Enjoy Service Group Co., Limited (HKG:1755), which a week ago released some disappointing annual results that could have a notable impact on how the market views the stock. S-Enjoy Service Group missed earnings this time around, with CN¥5.4b revenue coming in 6.8% below what the analysts had modelled. Statutory earnings per share (EPS) of CN¥0.51 also fell short of expectations by 11%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Following the latest results, S-Enjoy Service Group's eight analysts are now forecasting revenues of CN¥5.73b in 2024. This would be a credible 5.6% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to jump 41% to CN¥0.72. In the lead-up to this report, the analysts had been modelling revenues of CN¥6.53b and earnings per share (EPS) of CN¥0.72 in 2024. Indeed we can see that the consensus opinion has undergone some fundamental changes following the latest results, with a substantial drop in revenues and some minor tweaks to earnings numbers.

The average price target was reduced 14% to HK$4.75, with the lower revenue forecasts indicating negative sentiment towards S-Enjoy Service Group, even though earnings forecasts were unchanged. 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. The most optimistic S-Enjoy Service Group analyst has a price target of HK$7.30 per share, while the most pessimistic values it at HK$2.92. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the S-Enjoy Service Group's past performance and to peers in the same industry. It's pretty clear that there is an expectation that S-Enjoy Service Group's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.6% growth on an annualised basis. This is compared to a historical growth rate of 28% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.2% annually. Factoring in the forecast slowdown in growth, it looks like S-Enjoy Service Group is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Even so, long term profitability is more important for the value creation process. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of S-Enjoy Service Group's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on S-Enjoy Service Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple S-Enjoy Service Group analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for S-Enjoy Service Group that you should be aware of.

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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.