As you might know, New World Development Company Limited (HKG:17) recently reported its interim numbers. Results were mixed, with revenues of HK$32b exceeding expectations, even as earnings per share (EPS) came up short. Statutory earnings were HK$0.38 per share, -5.0% below what analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for New World Development from 14 analysts is for revenues of HK$71.9b in 2020, which is a notable 20% increase on its sales over the past 12 months. Statutory earnings per share are expected to expand 16% to HK$0.90. Before this earnings report, analysts had been forecasting revenues of HK$66.9b and earnings per share (EPS) of HK$0.83 in 2020. It looks like there's been a modest increase in sentiment following the latest results, with analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Despite these upgrades, analysts have not made any major changes to their price target of HK$12.33, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on New World Development, with the most bullish analyst valuing it at HK$14.22 and the most bearish at HK$8.80 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Analysts are definitely expecting New World Development's growth to accelerate, with the forecast 20% growth ranking favourably alongside historical growth of 5.6% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 16% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that New World Development is expected to grow at about the same rate as the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around New World Development's earnings potential next year. They also upgraded their revenue forecasts, although the latest estimates suggest that New World Development will grow in line with the overall market. The consensus price target held steady at HK$12.33, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple New World Development analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of New World Development's balance sheet, and whether we think New World Development is carrying too much debt, for free on our platform here.
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