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Earnings Update: Sa Sa International Holdings Limited Just Reported And Analysts Are Trimming Their Forecasts

Simply Wall St

Last week, you might have seen that Sa Sa International Holdings Limited (HKG:178) released its half-year result to the market. The early response was not positive, with shares down 2.8% to HK$1.74 in the past week. Revenues of HK$3.5b were in line with expectations, although losses per share came were HK$0.012, some 20% smaller than was expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.

Check out our latest analysis for Sa Sa International Holdings

SEHK:178 Past and Future Earnings, November 24th 2019

Taking into account the latest results, the current consensus, from the twelve analysts covering Sa Sa International Holdings, is for revenues of HK$6.79b in 2020, which would reflect an uncomfortable 12% reduction in Sa Sa International Holdings's sales over the past 12 months. Earnings per share are expected to nosedive 56% to HK$0.033 in the same period. In the lead-up to this report, analysts had been modelling revenues of HK$7.76b and earnings per share (EPS) of HK$0.11 in 2020. Indeed, we can see that analysts are a lot more bearish about Sa Sa International Holdings's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Despite the cuts to forecast earnings, there was no real change to the HK$1.93 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Sa Sa International Holdings, with the most bullish analyst valuing it at HK$2.70 and the most bearish at HK$1.28 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Further, we can compare these estimates to past performance, and see how Sa Sa International Holdings forecasts compare to the wider market's forecast performance. One obvious concern is that although revenues are forecast to continue shrinking, the expected 12% decline next year is substantially more severe than the 1.7% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 9.0% per year. So it looks like Sa Sa International Holdings is also expected to see its revenues decline at a faster rate than the wider market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at HK$1.93, with the latest estimates not enough to have an impact on analysts' estimated valuations.

With that in mind, we wouldn't be too quick to come to a conclusion on Sa Sa International Holdings. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Sa Sa International Holdings analysts - 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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