Radiant Opto-Electronics Corporation Just Beat EPS By 49%: Here's What Analysts Think Will Happen Next

It's been a pretty great week for Radiant Opto-Electronics Corporation (TWSE:6176) shareholders, with its shares surging 10% to NT$196 in the week since its latest first-quarter results. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at NT$11b, statutory earnings beat expectations by a notable 49%, coming in at NT$4.15 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Radiant Opto-Electronics

Taking into account the latest results, the most recent consensus for Radiant Opto-Electronics from six analysts is for revenues of NT$48.0b in 2024. If met, it would imply a reasonable 5.2% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to decrease 4.1% to NT$13.38 in the same period. In the lead-up to this report, the analysts had been modelling revenues of NT$51.7b and earnings per share (EPS) of NT$13.29 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The analysts have also increased their price target 23% to NT$177, clearly signalling that lower revenue forecasts next year are not expected to have a material impact on Radiant Opto-Electronics' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Radiant Opto-Electronics analyst has a price target of NT$221 per share, while the most pessimistic values it at NT$126. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Radiant Opto-Electronics shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Radiant Opto-Electronics is forecast to grow faster in the future than it has in the past, with revenues expected to display 7.0% annualised growth until the end of 2024. If achieved, this would be a much better result than the 3.0% 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 15% per year. Although Radiant Opto-Electronics' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Radiant Opto-Electronics. Long-term earnings power is much more important than next year's profits. We have forecasts for Radiant Opto-Electronics going out to 2026, and you can see them free on our platform here.

Even so, be aware that Radiant Opto-Electronics is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

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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.