Results: GEN Restaurant Group, Inc. Confounded Analyst Expectations With A Surprise Profit

It's been a sad week for GEN Restaurant Group, Inc. (NASDAQ:GENK), who've watched their investment drop 12% to US$8.25 in the week since the company reported its third-quarter result. Although revenues of US$49m were in line with analyst expectations, GEN Restaurant Group surprised on the earnings front, with an unexpected (statutory) profit of US$0.01 per share a nice improvement on the losses that the analystsforecast. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for GEN Restaurant Group

After the latest results, the three analysts covering GEN Restaurant Group are now predicting revenues of US$246.2m in 2025. If met, this would reflect a sizeable 24% improvement in revenue compared to the last 12 months. GEN Restaurant Group is also expected to turn profitable, with statutory earnings of US$0.09 per share. Before this earnings report, the analysts had been forecasting revenues of US$245.2m and earnings per share (EPS) of US$0.093 in 2025. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$13.17, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic GEN Restaurant Group analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$12.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting GEN Restaurant Group is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the GEN Restaurant Group's past performance and to peers in the same industry. The period to the end of 2025 brings more of the same, according to the analysts, with revenue forecast to display 19% growth on an annualised basis. That is in line with its 16% annual growth 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 revenues grow 9.8% per year. So it's pretty clear that GEN Restaurant Group is forecast to grow substantially faster than its 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. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$13.17, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on GEN Restaurant Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple GEN Restaurant Group analysts - going out to 2025, and you can see them free on our platform here.

We also provide an overview of the GEN Restaurant Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.