Some SJM Holdings Limited (HKG:880) Analysts Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of SJM Holdings Limited (HKG:880) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the 14 analysts covering SJM Holdings, is for revenues of HK$9.8b in 2022, which would reflect a noticeable 2.6% reduction in SJM Holdings' sales over the past 12 months. Losses are expected to increase substantially, hitting HK$0.80 per share. Yet before this consensus update, the analysts had been forecasting revenues of HK$12b and losses of HK$0.71 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for SJM Holdings

The consensus price target was broadly unchanged at HK$4.66, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic SJM Holdings analyst has a price target of HK$9.00 per share, while the most pessimistic values it at HK$3.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SJM Holdings' past performance and to peers in the same industry. We would also point out that the forecast 5.1% annualised revenue decline to the end of 2022 is better than the historical trend, which saw revenues shrink 25% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 25% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect SJM Holdings to suffer worse 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for SJM Holdings going out to 2024, and you can see them free on our platform here.

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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.