Longfor Group Holdings Limited Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

Longfor Group Holdings Limited (HKG:960) shareholders are probably feeling a little disappointed, since its shares fell 6.4% to HK$16.00 in the week after its latest half-yearly results. Longfor Group Holdings reported a serious miss, with revenue of CN¥62b falling a huge 22% short of analyst estimates. The bright side is that statutory earnings per share of CN¥4.05 were in line with 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.

See our latest analysis for Longfor Group Holdings

Taking into account the latest results, the consensus forecast from Longfor Group Holdings' 25 analysts is for revenues of CN¥231.7b in 2023. This reflects a reasonable 6.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to dip 2.9% to CN¥3.67 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥242.0b and earnings per share (EPS) of CN¥3.74 in 2023. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The average price target was reduced 7.0% to HK$27.99, with the lower revenue forecasts indicating negative sentiment towards Longfor Group Holdings, even though earnings forecasts were unchanged. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Longfor Group Holdings, with the most bullish analyst valuing it at HK$51.21 and the most bearish at HK$20.82 per share. 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. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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 Longfor Group Holdings' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 13% growth on an annualised basis. This is compared to a historical growth rate of 18% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% annually. Even after the forecast slowdown in growth, it seems obvious that Longfor Group Holdings is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Yet - earnings are more important to the intrinsic value of the business. 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Longfor Group Holdings going out to 2025, and you can see them free on our platform here.

Before you take the next step you should know about the 4 warning signs for Longfor Group Holdings (1 is a bit concerning!) that we have uncovered.

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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.