Arrail Group Limited Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

Shareholders might have noticed that Arrail Group Limited (HKG:6639) filed its annual result this time last week. The early response was not positive, with shares down 5.3% to HK$7.51 in the past week. Revenues fell badly short of expectations, with revenue of CN¥1.5b missing analyst predictions by 21%. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of CN¥0.38 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Arrail Group

Following the latest results, Arrail Group's three analysts are now forecasting revenues of CN¥1.88b in 2024. This would be a major 28% improvement in revenue compared to the last 12 months. Arrail Group is also expected to turn profitable, with statutory earnings of CN¥0.025 per share. Before this earnings report, the analysts had been forecasting revenues of CN¥2.28b and earnings per share (EPS) of CN¥0.28 in 2024. It looks like sentiment has declined substantially in the aftermath of these results, with a real cut to revenue estimates and a large cut to earnings per share numbers as well.

The consensus price target fell 7.4% to HK$11.80, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Arrail Group at HK$12.71 per share, while the most bearish prices it at HK$10.89. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Arrail Group's past performance and to peers in the same industry. The analysts are definitely expecting Arrail Group's growth to accelerate, with the forecast 28% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.3% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Arrail Group is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Arrail Group. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Arrail Group going out to 2026, and you can see them free on our platform here.

We also provide an overview of the Arrail Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.