It's shaping up to be a tough period for Man Wah Holdings Limited (HKG:1999), which a week ago released some disappointing half-year results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at HK$5.6b, earnings missed forecasts by 11%, coming in at just HK$0.36 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. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Man Wah Holdings from seven analysts is for revenues of HK$12.1b in 2020, which is a modest 6.3% increase on its sales over the past 12 months. Earnings per share are expected to swell 11% to HK$0.41. Before this earnings report, analysts had been forecasting revenues of HK$12.4b and earnings per share (EPS) of HK$0.39 in 2020. If anything, analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The average analyst price target rose 17% to HK$5.88, with analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Man Wah Holdings at HK$6.80 per share, while the most bearish prices it at HK$5.00. 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 Man Wah Holdings shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Man Wah Holdings's past performance and to peers in the same market. It's pretty clear that analysts expect Man Wah Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 6.3%, compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 9.5% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Man Wah Holdings.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Man Wah Holdings following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Man Wah Holdings analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Man Wah Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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