Results: MMG Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

Shareholders of MMG Limited (HKG:1208) will be pleased this week, given that the stock price is up 15% to HK$3.21 following its latest full-year results. MMG missed revenue estimates by 2.5%, with sales of US$4.3b, although statutory earnings per share (EPS) of US$0.079 beat expectations, coming in 5.8% ahead of analyst estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for MMG

Taking into account the latest results, the consensus forecast from MMG's eight analysts is for revenues of US$4.46b in 2022, which would reflect a modest 4.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to reduce 9.0% to US$0.07 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$4.41b and earnings per share (EPS) of US$0.067 in 2022. So the consensus seems to have become somewhat more optimistic on MMG's earnings potential following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 6.0% to HK$3.56. 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 MMG at HK$4.64 per share, while the most bearish prices it at HK$2.21. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting MMG's growth to accelerate, with the forecast 4.7% annualised growth to the end of 2022 ranking favourably alongside historical growth of 2.4% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that MMG is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards MMG following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

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. At Simply Wall St, we have a full range of analyst estimates for MMG going out to 2024, and you can see them free on our platform here..

Plus, you should also learn about the 4 warning signs we've spotted with MMG (including 1 which can't be ignored) .

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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.