It's shaping up to be a tough period for Zhejiang Dahua Technology Co., Ltd. (SZSE:002236), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Results look to have been somewhat negative - revenue fell 9.9% short of analyst estimates at CN¥8.7b, and statutory earnings of CN¥0.39 per share missed forecasts by 2.6%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Following the latest results, Zhejiang Dahua Technology's 13 analysts are now forecasting revenues of CN¥33.4b in 2024. This would be a modest 2.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to dive 52% to CN¥1.05 in the same period. In the lead-up to this report, the analysts had been modelling revenues of CN¥35.6b and earnings per share (EPS) of CN¥1.23 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.

The consensus price target fell 12% to CN¥19.80, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Zhejiang Dahua Technology at CN¥26.68 per share, while the most bearish prices it at CN¥14.15. 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.

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. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 5.9% growth on an annualised basis. That is in line with its 5.9% annual growth over the past five years. Compare this with the broader industry (in aggregate), which analyst estimates suggest will see revenues grow 18% annually. So it's pretty clear that Zhejiang Dahua Technology is expected to grow slower than similar companies in the same industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. 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. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Zhejiang Dahua Technology's future valuation.

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. We have estimates - from multiple Zhejiang Dahua Technology analysts - going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Zhejiang Dahua Technology (1 is significant!) that we have uncovered.

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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.