It's been a good week for Perfect World Co., Ltd. (SZSE:002624) shareholders, because the company has just released its latest interim results, and the shares gained 4.4% to CN¥7.60. Things were not great overall, with a surprise (statutory) loss of CN¥0.07 per share on revenues of CN¥2.8b, even though the analysts had been expecting a profit. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Perfect World's 13 analysts are now forecasting revenues of CN¥6.76b in 2024. This would be a meaningful 11% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with Perfect World forecast to report a statutory profit of CN¥0.47 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥8.06b and earnings per share (EPS) of CN¥0.49 in 2024. It looks like sentiment has fallen somewhat in the aftermath of these results, with a substantial drop in revenue estimates and a minor downgrade to earnings per share numbers as well.
The consensus price target fell 6.1% to CN¥9.54, with the weaker earnings outlook clearly leading valuation estimates. 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. There are some variant perceptions on Perfect World, with the most bullish analyst valuing it at CN¥13.50 and the most bearish at CN¥5.70 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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. One thing stands out from these estimates, which is that Perfect World is forecast to grow faster in the future than it has in the past, with revenues expected to display 23% annualised growth until the end of 2024. If achieved, this would be a much better result than the 4.7% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% per year. So it looks like Perfect World is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Perfect World. They also downgraded Perfect World's revenue estimates, but industry data suggests that it is expected to grow faster 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.
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 estimates - from multiple Perfect World analysts - going out to 2026, and you can see them free on our platform here.
Plus, you should also learn about the 1 warning sign we've spotted with Perfect World .
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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.