It's shaping up to be a tough period for Luye Pharma Group Ltd. (HKG:2186), which a week ago released some disappointing full-year results that could have a notable impact on how the market views the stock. Luye Pharma Group missed analyst forecasts, with revenues of CN¥6.4b and statutory earnings per share (EPS) of CN¥0.46, falling short by 2.1% and 9.0% respectively. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Luye Pharma Group after the latest results.
Taking into account the latest results, the most recent consensus for Luye Pharma Group from nine analysts is for revenues of CN¥7.12b in 2020 which, if met, would be a decent 12% increase on its sales over the past 12 months. Per-share earnings are expected to ascend 13% to CN¥0.52. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥7.39b and earnings per share (EPS) of CN¥0.58 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the CN¥6.70 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Luye Pharma Group, with the most bullish analyst valuing it at CN¥8.94 and the most bearish at CN¥4.29 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Luye Pharma Group's revenue growth is expected to slow, with forecast 12% increase next year well below the historical 22%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it seems obvious that Luye Pharma Group is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Luye Pharma Group. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Luye Pharma Group going out to 2022, and you can see them free on our platform here.
Even so, be aware that Luye Pharma Group is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...
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