The analysts might have been a bit too bullish on MGI Tech Co., Ltd. (SHSE:688114), given that the company fell short of expectations when it released its annual results last week. Revenues missed expectations somewhat, coming in at CN¥2.9b, but statutory earnings fell catastrophically short, with a loss of CN¥1.44 some 137% larger than what the analysts had predicted. 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.
After the latest results, the nine analysts covering MGI Tech are now predicting revenues of CN¥3.90b in 2024. If met, this would reflect a sizeable 34% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with MGI Tech forecast to report a statutory profit of CN¥0.016 per share. In the lead-up to this report, the analysts had been modelling revenues of CN¥3.94b and earnings per share (EPS) of CN¥0.14 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
The consensus price target held steady at CN¥98.40, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 MGI Tech analyst has a price target of CN¥110 per share, while the most pessimistic values it at CN¥77.79. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the MGI Tech's past performance and to peers in the same industry. It's clear from the latest estimates that MGI Tech's rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 15% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 18% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that MGI Tech is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for MGI Tech. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for MGI Tech going out to 2026, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, 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.