Analysts Just Slashed Their S-Enjoy Service Group Co., Limited (HKG:1755) EPS Numbers

One thing we could say about the analysts on S-Enjoy Service Group Co., Limited (HKG:1755) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about S-Enjoy Service Group recently, with the stock price up a notable 10% to HK$5.99 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the most recent consensus for S-Enjoy Service Group from its nine analysts is for revenues of CN¥6.0b in 2023 which, if met, would be a decent 16% increase on its sales over the past 12 months. Statutory earnings per share are presumed to leap 26% to CN¥0.61. Before this latest update, the analysts had been forecasting revenues of CN¥6.7b and earnings per share (EPS) of CN¥1.05 in 2023. Indeed, we can see that the analysts are a lot more bearish about S-Enjoy Service Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for S-Enjoy Service Group

It'll come as no surprise then, to learn that the analysts have cut their price target 15% to HK$9.57. 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. The most optimistic S-Enjoy Service Group analyst has a price target of HK$13.68 per share, while the most pessimistic values it at HK$7.33. 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.

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. It's pretty clear that there is an expectation that S-Enjoy Service Group's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 33% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 9.0% per year. Even after the forecast slowdown in growth, it seems obvious that S-Enjoy Service Group is also expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for S-Enjoy Service Group. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for S-Enjoy Service Group going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.