HK$7.30 - That's What Analysts Think WH Group Limited (HKG:288) Is Worth After These Results

Investors in WH Group Limited (HKG:288) had a good week, as its shares rose 7.0% to close at HK$5.63 following the release of its half-year results. Results look mixed - while revenue fell marginally short of analyst estimates at US$12b, statutory earnings were in line with expectations, at US$0.049 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on WH Group after the latest results.

View our latest analysis for WH Group

Following last week's earnings report, WH Group's 14 analysts are forecasting 2024 revenues to be US$25.8b, approximately in line with the last 12 months. Statutory earnings per share are predicted to soar 41% to US$0.099. In the lead-up to this report, the analysts had been modelling revenues of US$26.4b and earnings per share (EPS) of US$0.092 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been a 6.6% lift in the price target to HK$7.30, with the analysts signalling that the higher earnings forecasts are more relevant to the business than the weaker revenue estimates. 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 WH Group analyst has a price target of HK$14.41 per share, while the most pessimistic values it at HK$5.78. 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 analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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 WH Group's growth to accelerate, with the forecast 3.2% annualised growth to the end of 2024 ranking favourably alongside historical growth of 2.5% 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 5.6% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, WH Group is expected to grow slower than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around WH Group's earnings potential next year. 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. Yet - earnings are more important to the intrinsic value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for WH Group 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 2 warning signs for WH Group 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.