It's been a pretty great week for China Maple Leaf Educational Systems Limited (HKG:1317) shareholders, with its shares surging 17% to HK$2.70 in the week since its latest yearly results. Results look mixed - while revenue fell marginally short of analyst estimates at CN¥1.6b, earnings beat expectations 5.9%, with China Maple Leaf Educational Systems reporting profits of CN¥0.22 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Taking into account the latest results, the latest consensus from China Maple Leaf Educational Systems's ten analysts is for revenues of CN¥1.84b in 2020, which would reflect a solid 17% improvement in sales compared to the last 12 months. Earnings per share are expected to swell 12% to CN¥0.25. Yet prior to the latest earnings, analysts had been forecasting revenues of CN¥1.90b and earnings per share (EPS) of CN¥0.24 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 analyst price target was reduced 10% to CN¥3.31, with the lower revenue forecasts indicating negative sentiment towards China Maple Leaf Educational Systems, even though earnings forecasts were unchanged. 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 China Maple Leaf Educational Systems analyst has a price target of CN¥5.20 per share, while the most pessimistic values it at CN¥2.51. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that China Maple Leaf Educational Systems's revenue growth is expected to slow, with forecast 17% increase next year well below the historical 22%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 21% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect China Maple Leaf Educational Systems to grow slower than the wider market.
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. Yet - earnings are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on China Maple Leaf Educational Systems. Long-term earnings power is much more important than next year's profits. We have forecasts for China Maple Leaf Educational Systems going out to 2022, and you can see them free on our platform here.
We also provide an overview of the China Maple Leaf Educational Systems Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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