Kina Securities Limited (ASX:KSL) shares fell 4.2% to AU$1.27 in the week since its latest annual results. Sales greatly exceeded expectations, with revenues of K200m some 25% ahead of analyst forecasts. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Kina Securities after the latest results.
Taking into account the latest results, the latest consensus from Kina Securities's one analyst is for revenues of K288.5m in 2020, which would reflect a sizeable 44% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to leap 44% to K0.45. Yet prior to the latest earnings, analysts had been forecasting revenues of K236.2m and earnings per share (EPS) of K55.90 in 2020. Although sales sentiment looks to be improving, analysts have made a pretty serious reduction to per-share earnings estimates, showing a sharp increase in pessimism after earnings.
The consensus price target was unchanged at K373, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts.
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. It's clear from the latest estimates that Kina Securities's rate of growth is expected to accelerate meaningfully, with forecast 44% revenue growth noticeably faster than its historical growth of 24%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 2.6% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Kina Securities is expected to grow much faster than its 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. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. The consensus price target held steady at K373, 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 Kina Securities. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Kina Securities going out as far as 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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