Shareholders of Noah Holdings Limited (NYSE:NOAH) will be pleased this week, given that the stock price is up 16% to US$25.23 following its latest annual results. Revenues were in line with forecasts, at CN¥3.4b, although statutory earnings per share came in 16% below what the analysts expected, at CN¥13.23 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Noah Holdings after the latest results.
Taking into account the latest results, the current consensus, from the three analysts covering Noah Holdings, is for revenues of CN¥3.22b in 2020, which would reflect a noticeable 4.9% reduction in Noah Holdings's sales over the past 12 months. Statutory per share are forecast to be CN¥14.51, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥3.52b and earnings per share (EPS) of CN¥16.18 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
It'll come as no surprise then, to learn thatthe analysts have cut their price target 8.3% to US$35.62. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Noah Holdings at US$38.40 per share, while the most bearish prices it at US$32.00. This is a very narrow spread of estimates, implying either that Noah Holdings is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 4.9% revenue decline a notable change from historical growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Noah Holdings is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the 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 industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Noah Holdings analysts - going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Noah Holdings that we have uncovered.
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