China Literature Limited Just Missed EPS By 5.9%: Here's What Analysts Think Will Happen Next

It's been a good week for China Literature Limited (HKG:772) shareholders, because the company has just released its latest full-year results, and the shares gained 5.6% to HK$28.10. It looks like the results were a bit of a negative overall. While revenues of CN¥7.0b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 5.9% to hit CN¥0.79 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for China Literature

Taking into account the latest results, the most recent consensus for China Literature from 15 analysts is for revenues of CN¥7.67b in 2024. If met, it would imply a meaningful 9.4% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 37% to CN¥1.08. Before this earnings report, the analysts had been forecasting revenues of CN¥7.88b and earnings per share (EPS) of CN¥1.15 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.

The analysts made no major changes to their price target of HK$34.33, suggesting the downgrades are not expected to have a long-term impact on China Literature's valuation. 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 China Literature analyst has a price target of HK$48.27 per share, while the most pessimistic values it at HK$23.01. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Literature's past performance and to peers in the same industry. The analysts are definitely expecting China Literature's growth to accelerate, with the forecast 9.4% annualised growth to the end of 2024 ranking favourably alongside historical growth of 2.4% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that China Literature is expected to grow much faster than its 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. They also downgraded China Literature's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. The consensus price target held steady at HK$34.33, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on China Literature. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for China Literature going out to 2026, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.