As you might know, Rainbow Digital Commercial Co., Ltd. (SZSE:002419) last week released its latest annual, and things did not turn out so great for shareholders. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CN¥12b, statutory earnings missed forecasts by 14%, coming in at just CN¥0.19 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Rainbow Digital Commercial after the latest results.
Taking into account the latest results, the current consensus from Rainbow Digital Commercial's seven analysts is for revenues of CN¥13.2b in 2024. This would reflect a decent 9.0% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 36% to CN¥0.26. In the lead-up to this report, the analysts had been modelling revenues of CN¥13.2b and earnings per share (EPS) of CN¥0.27 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
There were no changes to revenue or earnings estimates or the price target of CN¥6.79, suggesting that the company has met expectations in its recent result. 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 Rainbow Digital Commercial, with the most bullish analyst valuing it at CN¥7.58 and the most bearish at CN¥5.80 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. For example, we noticed that Rainbow Digital Commercial's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 9.0% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 12% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 15% annually for the foreseeable future. Although Rainbow Digital Commercial's 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 obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Rainbow Digital Commercial's revenue is expected to perform worse than the wider industry. The consensus price target held steady at CN¥6.79, with the latest estimates not enough to have an impact on their price targets.
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 Rainbow Digital Commercial going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Rainbow Digital Commercial , and understanding them should be part of your investment process.
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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.