Nongfu Spring Co., Ltd. (HKG:9633) shareholders are probably feeling a little disappointed, since its shares fell 3.7% to HK$27.55 in the week after its latest half-year results. Results were roughly in line with estimates, with revenues of CN¥22b and statutory earnings per share of CN¥1.07. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Nongfu Spring from 23 analysts is for revenues of CN¥46.4b in 2024. If met, it would imply a credible 4.6% increase on its revenue over the past 12 months. Statutory per share are forecast to be CN¥1.10, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥48.3b and earnings per share (EPS) of CN¥1.16 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.
It'll come as no surprise then, to learn that the analysts have cut their price target 14% to HK$38.21. 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 Nongfu Spring at HK$60.19 per share, while the most bearish prices it at HK$19.07. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. It's pretty clear that there is an expectation that Nongfu Spring's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 9.5% growth on an annualised basis. This is compared to a historical growth rate of 18% over the past three years. Compare this to the 13 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 9.0% per year. So it's pretty clear that, while Nongfu Spring's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Nongfu Spring. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Nongfu Spring going out to 2026, and you can see them free on our platform here..
You can also see our analysis of Nongfu Spring's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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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.