Last week saw the newest first-quarter earnings release from Sobute New Materials Co., Ltd (SHSE:603916), an important milestone in the company's journey to build a stronger business. Revenues came in 2.3% below expectations, at CN¥579m. Statutory earnings per share were relatively better off, with a per-share profit of CN¥0.39 being roughly in line with analyst estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

After the latest results, the five analysts covering Sobute New Materials are now predicting revenues of CN¥3.62b in 2024. If met, this would reflect an okay 3.8% improvement in revenue compared to the last 12 months. Per-share earnings are expected to soar 51% to CN¥0.41. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥3.71b and earnings per share (EPS) of CN¥0.46 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a substantial drop in earnings per share numbers.

The consensus price target fell 6.2% to CN¥9.24, with the weaker earnings outlook clearly leading valuation estimates. 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. Currently, the most bullish analyst values Sobute New Materials at CN¥10.00 per share, while the most bearish prices it at CN¥8.50. This is a very narrow spread of estimates, implying either that Sobute New Materials is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 analysts are definitely expecting Sobute New Materials' growth to accelerate, with the forecast 5.0% annualised growth to the end of 2024 ranking favourably alongside historical growth of 2.7% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 15% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Sobute New Materials is expected to grow slower than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sobute New Materials. 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 Sobute New Materials' future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sobute New Materials going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Sobute New Materials has 3 warning signs 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.