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FinVolution Group (NYSE:FINV) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The revenue forecast for this year has experienced a facelift, with the analysts now much more optimistic on its sales pipeline.
Following the upgrade, the current consensus from FinVolution Group's three analysts is for revenues of CN¥7.3b in 2020 which - if met - would reflect a reasonable 4.0% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to plunge 20% to CN¥4.91 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥5.8b and earnings per share (EPS) of CN¥4.66 in 2020. The forecasts seem more optimistic now, with a great increase in revenue and a small increase to earnings per share estimates.
As a result, it might be a surprise to see that the analysts have cut their price target 7.1% to CN¥19.76, which could suggest the forecast improvement in performance is not expected to last. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic FinVolution Group analyst has a price target of CN¥4.00 per share, while the most pessimistic values it at CN¥1.99. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting FinVolution Group is an easy business to forecast or the underlying assumptions are obvious.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that FinVolution Group's revenue growth will slow down substantially, with revenues next year expected to grow 4.0%, compared to a historical growth rate of 27% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 8.8% next year. Factoring in the forecast slowdown in growth, it seems obvious that FinVolution Group is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at FinVolution Group.
Analysts are definitely bullish on FinVolution Group, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including its declining profit margins. You can learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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