Earnings Miss: Perfect World Co., Ltd. Missed EPS By 15% And Analysts Are Revising Their Forecasts

As you might know, Perfect World Co., Ltd. (SZSE:002624) last week released its latest yearly, and things did not turn out so great for shareholders. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CN¥7.8b, statutory earnings missed forecasts by 15%, coming in at just CN¥0.26 per share. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Perfect World

Taking into account the latest results, the current consensus from Perfect World's 14 analysts is for revenues of CN¥8.78b in 2024. This would reflect a decent 13% increase on its revenue over the past 12 months. Per-share earnings are expected to shoot up 103% to CN¥0.50. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥9.21b and earnings per share (EPS) of CN¥0.68 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 5.3% to CN¥13.34. 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. The most optimistic Perfect World analyst has a price target of CN¥19.20 per share, while the most pessimistic values it at CN¥8.30. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 Perfect World's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 1.9% 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 17% annually for the foreseeable future. So although Perfect World's revenue growth is expected to improve, it is still expected to grow slower than the 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. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Perfect World's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Perfect World. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Perfect World 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 3 warning signs for Perfect World (1 is potentially serious!) 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.