Newborn Town Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Newborn Town Inc. (HKG:9911) shareholders are probably feeling a little disappointed, since its shares fell 2.8% to HK$2.40 in the week after its latest full-year results. Revenues of CN¥3.3b fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of CN¥0.45 an impressive 60% ahead of estimates. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Newborn Town

Taking into account the latest results, the current consensus from Newborn Town's four analysts is for revenues of CN¥4.20b in 2024. This would reflect a sizeable 27% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to fall 13% to CN¥0.38 in the same period. Before this earnings report, the analysts had been forecasting revenues of CN¥4.35b and earnings per share (EPS) of CN¥0.33 in 2024. While revenue forecasts have been revised downwards, the analysts look to have become more optimistic on the company's cost base, given the substantial gain in to the earnings per share numbers.

The consensus has made no major changes to the price target of HK$3.83, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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. Currently, the most bullish analyst values Newborn Town at HK$4.45 per share, while the most bearish prices it at HK$3.31. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Newborn Town's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 27% growth on an annualised basis. This is compared to a historical growth rate of 42% 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) 19% per year. So it's pretty clear that, while Newborn Town's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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 Newborn Town following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at HK$3.83, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Newborn Town going out to 2026, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Newborn Town (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.