Party Time: Brokers Just Made Major Increases To Their Yatsen Holding Limited (NYSE:YSG) Earnings Forecasts

Shareholders in Yatsen Holding Limited (NYSE:YSG) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Yatsen Holding has also found favour with investors, with the stock up a noteworthy 10% to US$1.18 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the latest upgrade, the current consensus, from the four analysts covering Yatsen Holding, is for revenues of CN¥3.9b in 2022, which would reflect a considerable 17% reduction in Yatsen Holding's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 38% to CN¥1.45. However, before this estimates update, the consensus had been expecting revenues of CN¥3.5b and CN¥1.67 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

Check out our latest analysis for Yatsen Holding

The consensus price target fell 7.0%, to CN¥8.55, suggesting that the analysts remain pessimistic on the company, despite the improved earnings and revenue outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Yatsen Holding, with the most bullish analyst valuing it at CN¥1.49 and the most bearish at CN¥0.76 per share. This is a very narrow spread of estimates, implying either that Yatsen Holding is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Yatsen Holding's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Yatsen Holding's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 31% to the end of 2022. This tops off a historical decline of 24% a year over the past year. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.9% annually. So while a broad number of companies are forecast to grow, unfortunately Yatsen Holding is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Yatsen Holding's prospects. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, Yatsen Holding could be one for the watch list.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Yatsen Holding going out to 2024, and you can see them free on our platform here..

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.