Earnings Release: Here's Why Analysts Cut Their Sobute New Materials Co., Ltd (SHSE:603916) Price Target To CN¥9.24

As you might know, Sobute New Materials Co., Ltd (SHSE:603916) recently reported its quarterly numbers. Results look mixed - while revenue fell marginally short of analyst estimates at CN¥579m, statutory earnings were in line with expectations, at CN¥0.39 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Sobute New Materials

After the latest results, the five analysts covering Sobute New Materials are now predicting revenues of CN¥3.62b in 2024. If met, this would reflect a satisfactory 3.8% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 51% to CN¥0.41. In the lead-up to this report, the analysts had been modelling revenues of CN¥3.71b and earnings per share (EPS) of CN¥0.46 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.

It'll come as no surprise then, to learn that the analysts have cut their price target 6.2% to CN¥9.24. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Sobute New Materials, with the most bullish analyst valuing it at CN¥10.00 and the most bearish at CN¥8.50 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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. The analysts are definitely expecting Sobute New Materials' growth to accelerate, with the forecast 5.0% annualised growth to the end of 2024 ranking favourably alongside historical growth of 2.7% per annum 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 15% per year. So it's clear that despite the acceleration in growth, Sobute New Materials is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sobute New Materials. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse 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 Sobute New Materials. Long-term earnings power is much more important than next year's profits. We have forecasts for Sobute New Materials going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for Sobute New Materials 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.