Earnings Miss: Modern Dental Group Limited Missed EPS By 13% And Analysts Are Revising Their Forecasts

Modern Dental Group Limited (HKG:3600) came out with its annual results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was not a great result overall. While revenues of HK$3.0b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 13% to hit HK$0.38 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Modern Dental Group

Taking into account the latest results, the current consensus from Modern Dental Group's three analysts is for revenues of HK$3.33b in 2022, which would reflect a solid 13% increase on its sales over the past 12 months. Per-share earnings are expected to climb 14% to HK$0.43. Yet prior to the latest earnings, the analysts had been anticipated revenues of HK$3.47b and earnings per share (EPS) of HK$0.58 in 2022. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 31% to HK$7.89. 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. The most optimistic Modern Dental Group analyst has a price target of HK$11.21 per share, while the most pessimistic values it at HK$6.08. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the 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. The analysts are definitely expecting Modern Dental Group's growth to accelerate, with the forecast 13% annualised growth to the end of 2022 ranking favourably alongside historical growth of 7.1% 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 38% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Modern Dental Group is expected to grow slower than the wider 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Modern Dental Group's future valuation.

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 Modern Dental Group going out to 2024, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Modern Dental Group that you should be aware 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.