A week ago, Sichuan Swellfun Co.,Ltd (SHSE:600779) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 4.1% to hit CN¥785m. Sichuan SwellfunLtd also reported a statutory profit of CN¥0.12, which was an impressive 91% above what the analysts had 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sichuan SwellfunLtd after the latest results.
Following the latest results, Sichuan SwellfunLtd's twelve analysts are now forecasting revenues of CN¥5.29b in 2024. This would be a modest 2.8% improvement in revenue compared to the last 12 months. Per-share earnings are expected to accumulate 3.8% to CN¥2.79. Before this earnings report, the analysts had been forecasting revenues of CN¥5.40b and earnings per share (EPS) of CN¥2.88 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.
It'll come as no surprise then, to learn that the analysts have cut their price target 13% to CN¥47.31. 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. Currently, the most bullish analyst values Sichuan SwellfunLtd at CN¥66.00 per share, while the most bearish prices it at CN¥31.27. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for 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 Sichuan SwellfunLtd's revenue growth is expected to slow, with the forecast 5.7% annualised growth rate until the end of 2024 being well below the historical 11% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that Sichuan SwellfunLtd is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sichuan SwellfunLtd. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse 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 Sichuan SwellfunLtd. Long-term earnings power is much more important than next year's profits. We have forecasts for Sichuan SwellfunLtd 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 2 warning signs for Sichuan SwellfunLtd you should be aware of, and 1 of them makes us a bit uncomfortable.
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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.
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