Earnings Beat: Maoyan Entertainment Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Maoyan Entertainment (HKG:1896) shareholders are probably feeling a little disappointed, since its shares fell 4.6% to HK$6.63 in the week after its latest full-year results. It looks like a credible result overall - although revenues of CN¥3.3b were in line with what the analysts predicted, Maoyan Entertainment surprised by delivering a statutory profit of CN¥0.32 per share, a notable 12% above expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Maoyan Entertainment after the latest results.

See our latest analysis for Maoyan Entertainment

Taking into account the latest results, the consensus forecast from Maoyan Entertainment's seven analysts is for revenues of CN¥3.57b in 2022, which would reflect a modest 7.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to soar 62% to CN¥0.52. In the lead-up to this report, the analysts had been modelling revenues of CN¥4.07b and earnings per share (EPS) of CN¥0.62 in 2022. Indeed, we can see that the analysts are a lot more bearish about Maoyan Entertainment's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

The consensus price target fell 8.3% to HK$11.81, with the weaker earnings outlook clearly leading valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Maoyan Entertainment analyst has a price target of HK$17.99 per share, while the most pessimistic values it at HK$6.49. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that Maoyan Entertainment is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.4% annualised growth until the end of 2022. If achieved, this would be a much better result than the 1.0% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 22% per year. So although Maoyan Entertainment's revenue growth is expected to improve, it is still expected to grow slower than the 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Maoyan Entertainment's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Maoyan Entertainment. Long-term earnings power is much more important than next year's profits. We have forecasts for Maoyan Entertainment going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for Maoyan Entertainment that you should be aware of.

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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.