The analysts might have been a bit too bullish on Estun Automation Co., Ltd (SZSE:002747), given that the company fell short of expectations when it released its second-quarter results last week. Unfortunately, Estun Automation delivered a serious earnings miss. Revenues of CN¥851m were 18% below expectations, and statutory earnings per share of CN¥0.02 missed estimates by 31%. 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 Estun Automation after the latest results.

See our latest analysis for Estun Automation

Following the latest results, Estun Automation's 16 analysts are now forecasting revenues of CN¥3.93b in 2022. This would be a huge 26% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 30% to CN¥0.20. In the lead-up to this report, the analysts had been modelling revenues of CN¥4.09b and earnings per share (EPS) of CN¥0.25 in 2022. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share numbers.

The consensus price target fell 5.5% to CN¥24.01, with the weaker earnings outlook clearly leading valuation estimates. 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. There are some variant perceptions on Estun Automation, with the most bullish analyst valuing it at CN¥43.30 and the most bearish at CN¥14.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. It's clear from the latest estimates that Estun Automation's rate of growth is expected to accelerate meaningfully, with the forecast 60% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 25% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Estun Automation is expected to grow much faster than its 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. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Estun Automation. Long-term earnings power is much more important than next year's profits. We have forecasts for Estun Automation going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Estun Automation that you should be aware of.

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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.