Sheng Siong Group Ltd (SGX:OV8) last week reported its latest yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues came in 2.3% below expectations, at S$1.4b. Statutory earnings per share were relatively better off, with a per-share profit of S$0.089 being roughly in line with analyst estimates. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
SGX:OV8 Earnings and Revenue Growth February 29th 2024
Taking into account the latest results, the current consensus from Sheng Siong Group's six analysts is for revenues of S$1.42b in 2024. This would reflect a satisfactory 3.6% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 6.7% to S$0.095. In the lead-up to this report, the analysts had been modelling revenues of S$1.46b and earnings per share (EPS) of S$0.097 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the S$1.78 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Sheng Siong Group at S$1.97 per share, while the most bearish prices it at S$1.43. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Sheng Siong Group's revenue growth is expected to slow, with the forecast 3.6% annualised growth rate until the end of 2024 being well below the historical 7.9% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Sheng Siong Group.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sheng Siong Group. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Sheng Siong Group going out to 2026, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Sheng Siong Group that you need to be mindful of.
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