Last week saw the newest second-quarter earnings release from Toly Bread Co.,Ltd. (SHSE:603866), an important milestone in the company's journey to build a stronger business. Revenues were CN¥1.6b, 13% below analyst expectations, although losses didn't appear to worsen significantly, with a per-share statutory loss of CN¥0.36 being in line with what the analysts forecast. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Toly BreadLtd's five analysts is for revenues of CN¥6.82b in 2024. This would reflect a credible 3.7% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 7.1% to CN¥0.38. In the lead-up to this report, the analysts had been modelling revenues of CN¥7.14b and earnings per share (EPS) of CN¥0.37 in 2024. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
The consensus has made no major changes to the price target of CN¥7.25, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Toly BreadLtd, with the most bullish analyst valuing it at CN¥7.50 and the most bearish at CN¥7.00 per share. This is a very narrow spread of estimates, implying either that Toly BreadLtd is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. It's clear from the latest estimates that Toly BreadLtd's rate of growth is expected to accelerate meaningfully, with the forecast 7.6% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 4.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. So it's clear that despite the acceleration in growth, Toly BreadLtd is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Toly BreadLtd's earnings potential next year. 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. Even so, earnings are more important to the intrinsic value of the business. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Toly BreadLtd analysts - going out to 2026, and you can see them free on our platform here.
You still need to take note of risks, for example - Toly BreadLtd has 1 warning sign we think 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.
