SDI Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Shareholders might have noticed that SDI Corporation (TPE:2351) filed its yearly result this time last week. The early response was not positive, with shares down 2.6% to NT$78.20 in the past week. It looks like a credible result overall - although revenues of NT$8.5b were in line with what the analyst predicted, SDI surprised by delivering a statutory profit of NT$1.92 per share, a notable 14% above expectations. Following the result, the analyst has updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analyst has changed their mind on SDI after the latest results.

See our latest analysis for SDI

After the latest results, the one analyst covering SDI are now predicting revenues of NT$10.7b in 2021. If met, this would reflect a huge 27% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 181% to NT$5.40. Yet prior to the latest earnings, the analyst had been anticipated revenues of NT$10.4b and earnings per share (EPS) of NT$4.72 in 2021. There's been a pretty noticeable increase in sentiment, with the analyst upgrading revenues and making a decent improvement in earnings per share in particular.

As a result, it might be a surprise to see thatthe analyst has cut their price target 9.2% to NT$86.84, which could suggest the forecast improvement in performance is not expected to last.

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. For example, we noticed that SDI's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 27% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 0.03% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 14% annually. So it looks like SDI is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing here is that the analyst upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards SDI following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target fell measurably, with the analyst seemingly not reassured by the latest results, leading to a lower estimate of SDI's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on SDI. Long-term earnings power is much more important than next year's profits. We have analyst estimates for SDI going out as far as 2022, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for SDI that we have uncovered.

When trading SDI or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.