Tongda Group Holdings Limited Just Missed EPS By 38%: Here's What Analysts Think Will Happen Next

It's shaping up to be a tough period for Tongda Group Holdings Limited (HKG:698), which a week ago released some disappointing yearly results that could have a notable impact on how the market views the stock. Results showed a clear earnings miss, with HK$10.0b revenue coming in 6.3% lower than what the analystsexpected. Statutory earnings per share (EPS) of HK$0.029 missed the mark badly, arriving some 38% below what was expected. 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.

See our latest analysis for Tongda Group Holdings

Taking into account the latest results, the consensus forecast from Tongda Group Holdings' five analysts is for revenues of HK$10.8b in 2022, which would reflect a decent 8.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 78% to HK$0.042. Before this earnings report, the analysts had been forecasting revenues of HK$11.8b and earnings per share (EPS) of HK$0.052 in 2022. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.

The consensus price target fell 11% to HK$0.33, 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. Currently, the most bullish analyst values Tongda Group Holdings at HK$0.60 per share, while the most bearish prices it at HK$0.17. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Tongda Group Holdings' growth to accelerate, with the forecast 8.4% annualised growth to the end of 2022 ranking favourably alongside historical growth of 5.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 11% annually. So it's clear that despite the acceleration in growth, Tongda Group Holdings is expected to grow meaningfully slower than the industry average.

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 Tongda Group Holdings' future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Tongda Group Holdings going out to 2024, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 3 warning signs for Tongda Group Holdings you should know about.

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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.