It's been a good week for China YuHua Education Corporation Limited (HKG:6169) shareholders, because the company has just released its latest annual results, and the shares gained 6.8% to HK$5.16. Sales of CN¥1.7b surpassed estimates by 2.5%, although earnings per share missed badly, coming in 28% below expectations at CN¥0.15 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for China YuHua Education from 13 analysts is for revenues of CN¥2.37b in 2020, which is a huge 38% increase on its sales over the past 12 months. Earnings per share are expected to surge 97% to CN¥0.29. In the lead-up to this report, analysts had been modelling revenues of CN¥2.25b and earnings per share (EPS) of CN¥0.27 in 2020. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
With these upgrades, we're not surprised to see that analysts have lifted their price target 9.2% to CN¥5.43 per share. 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. Currently, the most bullish analyst values China YuHua Education at CN¥8.47 per share, while the most bearish prices it at CN¥3.71. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the China YuHua Education's past performance and to peers in the same market. It's clear from the latest estimates that China YuHua Education's rate of growth is expected to accelerate meaningfully, with forecast 38% revenue growth noticeably faster than its historical growth of 22%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 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect China YuHua Education to grow faster than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around China YuHua Education's earnings potential next year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for China YuHua Education going out to 2022, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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