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Time To Worry? Analysts Are Downgrading Their China Maple Leaf Educational Systems Limited (HKG:1317) Outlook

The analysts covering China Maple Leaf Educational Systems Limited (HKG:1317) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, China Maple Leaf Educational Systems' ten analysts currently expect revenues in 2020 to be CN¥1.6b, approximately in line with the last 12 months. Statutory earnings per share are supposed to shrink 5.0% to CN¥0.20 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥1.8b and earnings per share (EPS) of CN¥0.24 in 2020. Indeed, we can see that the analysts are a lot more bearish about China Maple Leaf Educational Systems' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for China Maple Leaf Educational Systems

SEHK:1317 Past and Future Earnings May 6th 2020
SEHK:1317 Past and Future Earnings May 6th 2020

The consensus price target fell 13% to CN¥2.79, with the weaker earnings outlook clearly leading analyst valuation 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. The most optimistic China Maple Leaf Educational Systems analyst has a price target of CN¥3.59 per share, while the most pessimistic values it at CN¥2.36. 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 China Maple Leaf Educational Systems shareholders.

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 pretty clear that there is an expectation that China Maple Leaf Educational Systems' revenue growth will slow down substantially, with revenues next year expected to grow 0.7%, compared to a historical growth rate of 20% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 19% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than China Maple Leaf Educational Systems.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for China Maple Leaf Educational Systems. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of China Maple Leaf Educational Systems.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for China Maple Leaf Educational Systems going out to 2022, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.