Tongkun Group Co., Ltd. (SHSE:601233) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Results were mixed, with revenues of CN¥27b exceeding expectations, even as statutory earnings per share (EPS) fell badly short. Earnings were CN¥0.21 per share, -42% short of analyst expectations. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from Tongkun Group's ten analysts is for revenues of CN¥91.1b in 2024, which would reflect a measurable 3.1% decline in revenue compared to the last year of performance. Per-share earnings are expected to leap 44% to CN¥1.06. Before this earnings report, the analysts had been forecasting revenues of CN¥92.4b and earnings per share (EPS) of CN¥1.24 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
It might be a surprise to learn that the consensus price target fell 8.4% to CN¥15.45, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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 Tongkun Group, with the most bullish analyst valuing it at CN¥18.90 and the most bearish at CN¥10.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 6.0% by the end of 2024. This indicates a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% per year. It's pretty clear that Tongkun Group's revenues are expected to perform substantially worse than the wider 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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Tongkun Group's revenue is expected to perform worse 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.
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 forecasts for Tongkun Group going out to 2026, and you can see them free on our platform here.
Even so, be aware that Tongkun Group is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
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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.