Last week, you might have seen that China Isotope & Radiation Corporation (HKG:1763) released its annual result to the market. The early response was not positive, with shares down 9.5% to HK$17.10 in the past week. Sales of CN¥4.0b surpassed estimates by 2.4%, although statutory earnings per share missed badly, coming in 25% below expectations at CN¥1.03 per share. Following the result, the 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from China Isotope & Radiation's dual analysts is for revenues of CN¥4.53b in 2020, which would reflect a notable 13% increase on its sales over the past 12 months. Per-share earnings are expected to climb 11% to CN¥1.14. Before this earnings report, the analysts had been forecasting revenues of CN¥4.72b and earnings per share (EPS) of CN¥1.60 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The consensus price target fell 12% to CN¥21.00, with the weaker earnings outlook clearly leading valuation estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that China Isotope & Radiation's revenue growth will slow down substantially, with revenues next year expected to grow 13%, compared to a historical growth rate of 17% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 20% next year. Factoring in the forecast slowdown in growth, it seems obvious that China Isotope & Radiation is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of China Isotope & Radiation's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for China Isotope & Radiation going out as far as 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for China Isotope & Radiation you should know about.
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