China Education Group Holdings Limited (HKG:839) shares fell 4.3% to HK$10.60 in the week since its latest full-year results. It was not a great result overall. While revenues of CN¥2.0b were in line with analyst predictions, earnings were less than expected, missing estimates by 16% to hit CN¥0.29 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
After the latest results, the 16 analysts covering China Education Group Holdings are now predicting revenues of CN¥2.61b in 2020. If met, this would reflect a substantial 34% improvement in sales compared to the last 12 months. Earnings per share are expected to soar 48% to CN¥0.44. Yet prior to the latest earnings, analysts had been forecasting revenues of CN¥2.47b and earnings per share (EPS) of CN¥0.49 in 2020. So it's pretty clear analysts have mixed opinions on China Education Group Holdings after the latest results; even though they upped their revenue numbers, it came at the cost of a substantial drop in per-share earnings expectations.
The consensus price target was unchanged at CN¥12.67, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values China Education Group Holdings at CN¥14.60 per share, while the most bearish prices it at CN¥10.52. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Analysts are definitely expecting China Education Group Holdings's growth to accelerate, with the forecast 34% growth ranking favourably alongside historical growth of 20% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 21% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect China Education Group Holdings to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. The consensus price target held steady at CN¥12.67, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for China Education Group Holdings going out to 2022, and you can see them free on our platform here.
We also provide an overview of the China Education Group Holdings Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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