The analysts might have been a bit too bullish on Kunshan Dongwei Technology Co.,Ltd. (SHSE:688700), given that the company fell short of expectations when it released its yearly results last week. Unfortunately, Kunshan Dongwei TechnologyLtd delivered a serious earnings miss. Revenues of CN¥915m were 13% below expectations, and statutory earnings per share of CN¥0.69 missed estimates by 29%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Kunshan Dongwei TechnologyLtd's six analysts is for revenues of CN¥1.82b in 2024. This would reflect a sizeable 99% increase on its revenue over the past 12 months. Per-share earnings are expected to soar 78% to CN¥1.20. Before this earnings report, the analysts had been forecasting revenues of CN¥2.06b and earnings per share (EPS) of CN¥1.89 in 2024. Indeed, we can see that the analysts are a lot more bearish about Kunshan Dongwei TechnologyLtd's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 13% to CN¥62.98. 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. Currently, the most bullish analyst values Kunshan Dongwei TechnologyLtd at CN¥101 per share, while the most bearish prices it at CN¥37.00. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Kunshan Dongwei TechnologyLtd's rate of growth is expected to accelerate meaningfully, with the forecast 99% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 20% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 19% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Kunshan Dongwei TechnologyLtd to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kunshan Dongwei TechnologyLtd. 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.
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. At Simply Wall St, we have a full range of analyst estimates for Kunshan Dongwei TechnologyLtd going out to 2025, and you can see them free on our platform here..
It is also worth noting that we have found 3 warning signs for Kunshan Dongwei TechnologyLtd that you need to take into consideration.
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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.