The analysts might have been a bit too bullish on Zhongyin Babi Food Co., Ltd. (SHSE:605338), given that the company fell short of expectations when it released its yearly results last week. Zhongyin Babi Food missed analyst forecasts, with revenues of CN¥1.6b and statutory earnings per share (EPS) of CN¥0.85, falling short by 6.4% and 4.9% respectively. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Zhongyin Babi Food's eight analysts is for revenues of CN¥1.90b in 2024. This would reflect a notable 17% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to ascend 20% to CN¥1.03. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥2.07b and earnings per share (EPS) of CN¥1.07 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 20% to CN¥23.10, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Zhongyin Babi Food, with the most bullish analyst valuing it at CN¥27.00 and the most bearish at CN¥19.20 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Zhongyin Babi Food's growth to accelerate, with the forecast 17% annualised growth to the end of 2024 ranking favourably alongside historical growth of 14% per annum 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 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Zhongyin Babi Food is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Zhongyin Babi Food. They also downgraded Zhongyin Babi Food's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Zhongyin Babi Food. Long-term earnings power is much more important than next year's profits. We have forecasts for Zhongyin Babi Food going out to 2025, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Zhongyin Babi Food you should know about.
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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.
