Investors in Chow Sang Sang Holdings International Limited (HKG:116) had a good week, as its shares rose 5.7% to close at HK$7.82 following the release of its yearly results. Statutory earnings per share fell badly short of expectations, coming in at HK$0.95, some 33% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at HK$18b. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Chow Sang Sang Holdings International's six analysts is for revenues of HK$18.4b in 2020, which would reflect a reasonable 3.8% increase on its sales over the past 12 months. Per-share earnings are expected to jump 61% to HK$1.53. Before this earnings report, the analysts had been forecasting revenues of HK$18.2b and earnings per share (EPS) of HK$1.55 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target fell 6.9% to HK$11.34, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the annual results. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Chow Sang Sang Holdings International at HK$13.50 per share, while the most bearish prices it at HK$8.10. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Chow Sang Sang Holdings International shareholders.
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. For example, we noticed that Chow Sang Sang Holdings International's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 3.8%, well above its historical decline of 0.7% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 11% next year. So although Chow Sang Sang Holdings International's revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Chow Sang Sang Holdings International's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Chow Sang Sang Holdings International analysts - going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Chow Sang Sang Holdings International you should know about.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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