Last week, you might have seen that SJM Holdings Limited (HKG:880) released its yearly result to the market. The early response was not positive, with shares down 3.0% to HK$2.30 in the past week. It was a pretty bad result overall; while revenues were in line with expectations at HK$22b, statutory losses exploded to HK$0.28 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the latest results, SJM Holdings' eleven analysts are now forecasting revenues of HK$28.3b in 2024. This would be a huge 31% improvement in revenue compared to the last 12 months. SJM Holdings is also expected to turn profitable, with statutory earnings of HK$0.12 per share. Before this earnings report, the analysts had been forecasting revenues of HK$28.8b and earnings per share (EPS) of HK$0.091 in 2024. Although the analysts have lowered their revenue forecasts, they've also made a massive increase in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.
The consensus has made no major changes to the price target of HK$3.39, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 SJM Holdings, with the most bullish analyst valuing it at HK$7.15 and the most bearish at HK$1.90 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.
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. For example, we noticed that SJM Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 31% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 28% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 14% annually. So it looks like SJM Holdings is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around SJM Holdings' earnings potential next year. They also downgraded SJM Holdings' revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at HK$3.39, with the latest estimates not enough to have an impact on their price targets.
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 SJM Holdings going out to 2026, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for SJM Holdings you should know about.
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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.