Shareholders in KWG Group Holdings Limited (HKG:1813) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market may be pricing in some blue sky too, with the share price gaining 23% to CN¥11.02 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the latest consensus from KWG Group Holdings' 16 analysts is for revenues of CN¥31b in 2020, which would reflect a huge 22% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to plunge 25% to CN¥2.32 in the same period. Previously, the analysts had been modelling revenues of CN¥25b and earnings per share (EPS) of CN¥2.04 in 2020. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for KWG Group Holdings 11% to CN¥12.59 on the back of these upgrades. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic KWG Group Holdings analyst has a price target of CN¥14.12 per share, while the most pessimistic values it at CN¥9.76. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the KWG Group Holdings' past performance and to peers in the same industry. It's clear from the latest estimates that KWG Group Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 22% revenue growth noticeably faster than its historical growth of 13% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that KWG Group Holdings is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, KWG Group Holdings could be worth investigating further.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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