Revenue Beat: Leader Harmonious Drive Systems Co., Ltd. Exceeded Revenue Forecasts By 6.3% And Analysts Are Updating Their Estimates

Investors in Leader Harmonious Drive Systems Co., Ltd. (SHSE:688017) had a good week, as its shares rose 6.7% to close at CN¥63.99 following the release of its half-yearly results. Results overall were respectable, with statutory earnings of CN¥0.22 per share roughly in line with what the analysts had forecast. Revenues of CN¥90m came in 6.3% ahead of analyst predictions. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Leader Harmonious Drive Systems

Taking into account the latest results, the current consensus from Leader Harmonious Drive Systems' twelve analysts is for revenues of CN¥416.2m in 2024. This would reflect a solid 17% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 48% to CN¥0.61. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥443.2m and earnings per share (EPS) of CN¥0.67 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 16% to CN¥63.62. 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 Leader Harmonious Drive Systems at CN¥111 per share, while the most bearish prices it at CN¥40.50. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Leader Harmonious Drive Systems is forecast to grow faster in the future than it has in the past, with revenues expected to display 36% annualised growth until the end of 2024. If achieved, this would be a much better result than the 4.7% annual decline over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 16% per year. Not only are Leader Harmonious Drive Systems' revenues expected to improve, it seems that the analysts are also expecting it 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 Leader Harmonious Drive Systems. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Leader Harmonious Drive Systems' future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Leader Harmonious Drive Systems analysts - going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Leader Harmonious Drive Systems that you need to be mindful 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.