SJM Holdings Limited (HKG:880) Analysts Just Slashed This Year's Estimates

Today is shaping up negative for SJM Holdings Limited (HKG:880) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

After this downgrade, SJM Holdings' 14 analysts are now forecasting revenues of HK$20b in 2021. This would be a huge 165% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 31% to HK$0.37. Yet prior to the latest estimates, the analysts had been forecasting revenues of HK$22b and losses of HK$0.27 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for SJM Holdings

The consensus price target was broadly unchanged at HK$10.56, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on SJM Holdings, with the most bullish analyst valuing it at HK$13.70 and the most bearish at HK$7.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that SJM Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 266% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 16% 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 32% annually. Not only are SJM Holdings' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of SJM Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for SJM Holdings going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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