Last week saw the newest yearly earnings release from Wisdom Education International Holdings Company Limited (HKG:6068), an important milestone in the company's journey to build a stronger business. It was not a great result overall. While revenues of CN¥1.7b were in line with analyst predictions, earnings were less than expected, missing estimates by 16% to hit CN¥0.17 per share. 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. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on Wisdom Education International Holdings after the latest results.
After the latest results, the 13 analysts covering Wisdom Education International Holdings are now predicting revenues of CN¥1.99b in 2020. If met, this would reflect a meaningful 18% improvement in sales compared to the last 12 months. Earnings per share are expected to jump 38% to CN¥0.24. In the lead-up to this report, analysts had been modelling revenues of CN¥2.05b and earnings per share (EPS) of CN¥0.25 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 7.5% to CN¥4.20, with the weaker earnings outlook clearly leading analyst valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Wisdom Education International Holdings, with the most bullish analyst valuing it at CN¥6.27 and the most bearish at CN¥3.35 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
In addition, we can look to Wisdom Education International Holdings's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that Wisdom Education International Holdings's revenue growth is expected to slow, with forecast 18% increase next year well below the historical 25%p.a. growth over the last five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 22% per year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Wisdom Education International Holdings to grow at about the same rate as the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Wisdom Education International Holdings. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic 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. At Simply Wall St, we have a full range of analyst estimates for Wisdom Education International Holdings going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Wisdom Education International Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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