Investors in Li Ning Company Limited (HKG: 2331) had a good week as its shares rose 6.6% to close at HK $ 47.45 following the release of its annual results. The result was broadly positive – although revenue of CN $ 14 billion was in line with what analysts had predicted, Li Ning surprised with a statutory profit of CN 0.68 per share, slightly above expectations. Analysts usually update their forecasts with each earnings report, and we can judge from their estimates whether their view of the business has changed or if there are new concerns to consider. With that in mind, we’ve put together the latest statutory forecast to see what analysts expect for next year.
Check out our latest analysis for Li Ning
Following the latest results, Li Ning’s 29 analysts now forecast CNN 18.2 billion in revenue in 2021. That would represent a huge 26% improvement in sales from the past 12 months. Statutory earnings per share are expected to increase 34% to 0.93 CN. Yet before the latest results, analysts were forecasting revenues of 18.2 billion yen and earnings per share (EPS) of 0.89 yen in 2021. So the consensus seems to have become a little more optimistic about profit potential. of Li Ning as a result of these results. .
The consensus price target remained unchanged at CN Â¥ 44.33, implying that improving earnings prospects should not have a long-term impact on creating shareholder value. It might also be instructive to look at the range of analysts’ estimates, to gauge how different outliers are from the average. There are a few variations of perception on Li Ning, with the most bullish analyst valuing it at CN 68.78 and the most bearish at CN Â¥ 7.94 per share. So we wouldn’t give too much credibility to analysts’ pricing targets in this case, as there are clearly very different views on what kind of performance this company can deliver. With that in mind, we wouldn’t trust the consensus price target too much, as this is only an average and analysts clearly have deeply divergent views on the company.
Looking at the big picture now, one of the ways we can make sense of these forecasts is to see how they stack up against both past performance and industry growth estimates. It is clear from the latest estimates that Li Ning’s growth rate is expected to accelerate significantly, with an annualized revenue growth forecast of 26% by the end of 2021 significantly faster than its historic growth of 16%. per year for the past five years. In contrast, our data suggests that other companies (with analyst coverage) in a similar industry are expected to increase their revenue by 15% per year. It seems obvious that while the growth outlook is brighter than in the recent past, analysts also expect Li Ning to grow faster than the industry as a whole.
The bottom line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Li Ning’s earnings potential next year. Fortunately, there were no major changes to the revenue forecast, with the business still expected to grow faster than the industry as a whole. The consensus price target held steady at CN Â¥ 44.33 as the latest estimates were not enough to impact their price targets.
With that in mind, we wouldn’t be too quick to draw a conclusion on Li Ning. Long-term earnings power is much more important than next year’s earnings. We have a forecast for Li Ning through 2023, and you can see it for free on our platform here.
We don’t want to rain too much on the parade, but we also found 1 warning sign for Li Ning that you need to be aware of.
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