OneSmart International Education Group Limited (NYSE:ONE) shareholders are probably feeling a little disappointed, since its shares fell 9.2% to US$4.05 in the week after its latest quarterly results. It was a weak result overall, with OneSmart International Education Group reporting CN¥886m in revenues, which was 23% less than what the analysts had expected. The 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from OneSmart International Education Group's twin analysts is for revenues of CN¥3.54b in 2020, which would reflect a not inconsiderable 13% decline in sales compared to the last year of performance. Statutory earnings per share are predicted to shoot up 218% to CN¥1.77. In the lead-up to this report, the analysts had been modelling revenues of CN¥4.72b and earnings per share (EPS) of CN¥2.70 in 2020. It looks like sentiment has declined substantially in the aftermath of these results, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the CN¥54.92 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 30% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 21% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - OneSmart International Education Group 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. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at CN¥54.92, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have analyst estimates for OneSmart International Education Group going out as far as 2022, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for OneSmart International Education Group (1 is significant!) that you need to take into consideration.
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