Earnings Beat: China Online Education Group Just Beat Analyst Forecasts, And Analysts Have Been Lifting Their Forecasts
Shareholders will be ecstatic, with their stake up 26% over the past week following China Online Education Group's (NYSE:COE) latest full-year results. Revenues came in at CN¥1.5b, in line with expectations, while statutory losses per share were substantially higher than expected, at CN¥4.85 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
See our latest analysis for China Online Education Group
Taking into account the latest results, the most recent consensus for China Online Education Group from twin analysts is for revenues of CN¥1.81b in 2020, which is a huge 22% increase on its sales over the past 12 months. Earnings are expected to improve, with China Online Education Group forecast to report a statutory profit of CN¥0.42 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of CN¥1.68b and losses of CN¥2.08 per share in 2020. So we can see there's been a pretty clear upgrade to expectations following the latest results, with a small lift in revenues expected to lead to profitability earlier than previously forecast.
It will come as no surprise to learn that analysts have increased their price target for China Online Education Group 165% to CN¥257 on the back of these upgrades.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that China Online Education Group's revenue growth is expected to slow, with forecast 22% increase next year well below the historical 44%p.a. growth over the last five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 19% per year. So it's pretty clear that, while China Online Education Group's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away from these updates is that analysts now expect China Online Education Group to become profitable next year, compared to previous expectations that it would report a loss. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
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.
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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