MMG Limited Just Missed Earnings - But Analysts Have Updated Their Models

The investors in MMG Limited's (HKG:1208) will be rubbing their hands together with glee today, after the share price leapt 23% to HK$2.58 in the week following its yearly results. Results overall were not great, with earnings of US$0.001 per share falling drastically short of analyst expectations. Meanwhile revenues hit US$4.3b and were slightly better than forecasts. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for MMG

Taking into account the latest results, the seven analysts covering MMG provided consensus estimates of US$3.93b revenue in 2024, which would reflect a definite 9.4% decline over the past 12 months. Statutory earnings per share are predicted to surge 3,002% to US$0.032. Before this earnings report, the analysts had been forecasting revenues of US$4.22b and earnings per share (EPS) of US$0.039 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.

The analysts made no major changes to their price target of HK$2.99, suggesting the downgrades are not expected to have a long-term impact on MMG's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on MMG, with the most bullish analyst valuing it at HK$4.39 and the most bearish at HK$2.00 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that revenue is expected to reverse, with a forecast 9.4% annualised decline to the end of 2024. That is a notable change from historical growth of 4.5% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.5% per year. It's pretty clear that MMG's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for MMG. 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. The consensus price target held steady at HK$2.99, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple MMG analysts - going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for MMG (of which 1 is a bit concerning!) you should know about.

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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.