Investors in Autohome Inc. (NYSE:ATHM) had a good week, as its shares rose 7.3% to close at US$85.79 following the release of its yearly results. Autohome reported CN¥8.4b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of CN¥26.64 beat expectations, being 4.5% higher than what analysts expected. Following the result, 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. 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 latest consensus from Autohome's 14 analysts is for revenues of CN¥9.03b in 2020, which would reflect a credible 7.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 3.4% to CN¥27.92. In the lead-up to this report, analysts had been modelling revenues of CN¥9.39b and earnings per share (EPS) of CN¥28.27 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The average price target was steady at US$86.32 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Autohome analyst has a price target of US$97.30 per share, while the most pessimistic values it at US$71.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Autohome's performance in recent years. It's pretty clear that analysts expect Autohome's revenue growth will slow down substantially, with revenues next year expected to grow 7.3%, compared to a historical growth rate of 22% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 14% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Autohome.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. 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. Still, earnings per share are more important to value creation for shareholders. The consensus price target held steady at CN¥86.32, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Autohome going out to 2023, and you can see them free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.