China Online Education Group (NYSE:COE) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.1% to hit CN¥538m. China Online Education Group also reported a statutory profit of CN¥1.32, which was an impressive 175% above what the analysts had forecast. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for China Online Education Group from two analysts is for revenues of CN¥2.48b in 2021 which, if met, would be a sizeable 138% increase on its sales over the past 12 months. China Online Education Group is also expected to turn profitable, with statutory earnings of CN¥7.34 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥2.46b and earnings per share (EPS) of CN¥7.55 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at CN¥243, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Online Education Group's past performance and to peers in the same industry. It's clear from the latest estimates that China Online Education Group's rate of growth is expected to accelerate meaningfully, with the forecast 138% revenue growth noticeably faster than its historical growth of 35%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 23% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that China Online Education Group is expected to grow much faster than its industry.
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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at CN¥243, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on China Online Education Group. Long-term earnings power is much more important than next year's profits. We have analyst estimates for China Online Education Group going out as far as 2021, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for China Online Education Group that you should be aware of.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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