Last week, you might have seen that IMAX China Holding, Inc. (HKG:1970) released its yearly result to the market. The early response was not positive, with shares down 4.2% to HK$15.04 in the past week. Revenues of US$124m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.12, missing estimates by 4.9%. 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the 14 analysts covering IMAX China Holding, is for revenues of US$109.7m in 2020, which would reflect a chunky 12% reduction in IMAX China Holding's sales over the past 12 months. Statutory earnings per share are expected to fall 15% to US$0.10 in the same period. Before this earnings report, analysts had been forecasting revenues of US$130.9m and earnings per share (EPS) of US$0.13 in 2020. Indeed, we can see that analysts are a lot more bearish about IMAX China Holding's prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that analysts have cut their price target 8.3% to US$2.40. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on IMAX China Holding, with the most bullish analyst valuing it at US$3.09 and the most bearish at US$1.98 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
In addition, we can look to IMAX China Holding's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 12% a significant reduction from annual growth of 6.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect IMAX China Holding to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for IMAX China Holding. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of IMAX China Holding's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on IMAX China Holding. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for IMAX China Holding going out to 2022, 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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