Revenue Miss: Pony Testing Co., Ltd. Fell 47% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models

Pony Testing Co., Ltd. (SZSE:300887) shareholders are probably feeling a little disappointed, since its shares fell 8.0% to CN¥10.34 in the week after its latest quarterly results. Pony Testing reported a serious miss, with revenue of CN¥334m falling a huge 47% short of analyst estimates. The bright side is that statutory earnings per share of CN¥0.20 were in line with forecasts. 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.

See our latest analysis for Pony Testing

Taking into account the latest results, the consensus forecast from Pony Testing's seven analysts is for revenues of CN¥2.82b in 2024. This reflects a substantial 24% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to leap 54,390% to CN¥0.54. Before this earnings report, the analysts had been forecasting revenues of CN¥3.21b and earnings per share (EPS) of CN¥0.72 in 2024. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

The analysts made no major changes to their price target of CN¥12.39, suggesting the downgrades are not expected to have a long-term impact on Pony Testing's valuation. 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. The most optimistic Pony Testing analyst has a price target of CN¥16.00 per share, while the most pessimistic values it at CN¥10.40. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Pony Testing's past performance and to peers in the same industry. It's clear from the latest estimates that Pony Testing's rate of growth is expected to accelerate meaningfully, with the forecast 33% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 17% p.a. over the past three 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. Factoring in the forecast acceleration in revenue, it's pretty clear that Pony Testing 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. The consensus price target held steady at CN¥12.39, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Pony Testing. Long-term earnings power is much more important than next year's profits. We have forecasts for Pony Testing going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 3 warning signs for Pony Testing (1 is potentially serious!) that we have uncovered.

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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.