Shareholders might have noticed that Zhejiang Dun'an Artificial Environment Co., Ltd (SZSE:002011) filed its quarterly result this time last week. The early response was not positive, with shares down 2.3% to CN¥11.04 in the past week. Revenues were CN¥2.6b, 10% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of CN¥0.70 being in line with what the analysts anticipated. 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.
Taking into account the latest results, the consensus forecast from Zhejiang Dun'an Artificial Environment's eight analysts is for revenues of CN¥12.5b in 2024. This reflects a decent 10% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to jump 37% to CN¥0.95. In the lead-up to this report, the analysts had been modelling revenues of CN¥12.9b and earnings per share (EPS) of CN¥0.88 in 2024. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
There's been no real change to the average price target of CN¥16.22, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Zhejiang Dun'an Artificial Environment at CN¥16.38 per share, while the most bearish prices it at CN¥16.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Zhejiang Dun'an Artificial Environment 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 Zhejiang Dun'an Artificial Environment's past performance and to peers in the same industry. The analysts are definitely expecting Zhejiang Dun'an Artificial Environment's growth to accelerate, with the forecast 14% annualised growth to the end of 2024 ranking favourably alongside historical growth of 5.1% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 15% per year. Zhejiang Dun'an Artificial Environment is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Zhejiang Dun'an Artificial Environment's earnings potential next year. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Even so, earnings are more important to the intrinsic value of the business. 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 Zhejiang Dun'an Artificial Environment 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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