It's been a good week for Farasis Energy (Gan Zhou) Co., Ltd. (SHSE:688567) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.9% to CN¥8.70. It was a solid earnings report, with revenues and earnings both coming in very strong. Revenues were 15% higher than the analysts had forecast, at CN¥4.0b, while the company also delivered a surprise statutory profit, against analyst expectations of a loss. 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.

After the latest results, the consensus from Farasis Energy (Gan Zhou)'s four analysts is for revenues of CN¥15.3b in 2024, which would reflect a noticeable 7.0% decline in revenue compared to the last year of performance. Earnings are expected to improve, with Farasis Energy (Gan Zhou) forecast to report a statutory profit of CN¥0.28 per share. Before this earnings report, the analysts had been forecasting revenues of CN¥16.1b and earnings per share (EPS) of CN¥0.28 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

It will come as no surprise then, that the consensus price target fell 21% to CN¥9.10following these changes. 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. There are some variant perceptions on Farasis Energy (Gan Zhou), with the most bullish analyst valuing it at CN¥15.00 and the most bearish at CN¥7.70 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 14% annualised decline to the end of 2024. That is a notable change from historical growth of 54% 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 16% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Farasis Energy (Gan Zhou) is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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. At Simply Wall St, we have a full range of analyst estimates for Farasis Energy (Gan Zhou) going out to 2026, and you can see them free on our platform here..

You can also see our analysis of Farasis Energy (Gan Zhou)'s Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.