It's been a pretty great week for Powerlong Real Estate Holdings Limited (HKG:1238) shareholders, with its shares surging 12% to HK$5.70 in the week since its latest annual results. Results look mixed - while revenue fell marginally short of analyst estimates at CN¥26b, statutory earnings beat expectations 7.1%, with Powerlong Real Estate Holdings reporting profits of CN¥1.00 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 gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Powerlong Real Estate Holdings from seven analysts is for revenues of CN¥35.3b in 2020, which is a major 36% increase on its sales over the past 12 months. Statutory earnings per share are forecast to crater 22% to CN¥0.78 in the same period. In the lead-up to this report, analysts had been modelling revenues of CN¥35.4b and earnings per share (EPS) of CN¥1.19 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at CN¥6.12, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Powerlong Real Estate Holdings analyst has a price target of CN¥6.98 per share, while the most pessimistic values it at CN¥5.61. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Powerlong Real Estate Holdings's performance in recent years. It's clear from the latest estimates that Powerlong Real Estate Holdings's rate of growth is expected to accelerate meaningfully, with forecast 36% revenue growth noticeably faster than its historical growth of 19%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 16% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Powerlong Real Estate Holdings 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. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Powerlong Real Estate Holdings going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Powerlong Real Estate Holdings's balance sheet, and whether we think Powerlong Real Estate Holdings is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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