Investors in Weihai Guangwei Composites Co., Ltd. (SZSE:300699) had a good week, as its shares rose 2.4% to close at CN¥26.80 following the release of its quarterly results. Revenues of CN¥644m beat forecasts by 16%, although statutory earnings per share disappointed slightly, coming in 9.5% below expectations at CN¥0.25. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Weihai Guangwei Composites' eight analysts are now forecasting revenues of CN¥2.67b in 2024. This would be a meaningful 9.0% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to rise 9.7% to CN¥1.10. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥2.74b and earnings per share (EPS) of CN¥1.17 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the CN¥30.80 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Weihai Guangwei Composites at CN¥34.00 per share, while the most bearish prices it at CN¥28.20. This is a very narrow spread of estimates, implying either that Weihai Guangwei Composites is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Weihai Guangwei Composites' growth to accelerate, with the forecast 19% annualised growth to the end of 2024 ranking favourably alongside historical growth of 8.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Weihai Guangwei Composites is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
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. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. 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 forecasts for Weihai Guangwei Composites going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Weihai Guangwei Composites (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
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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.
