The analysts might have been a bit too bullish on E-House (China) Enterprise Holdings Limited (HKG:2048), given that the company fell short of expectations when it released its annual results last week. It looks like quite a negative result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of CN¥9.1b missed by 13%, and statutory earnings per share of CN¥0.60 fell short of forecasts by 30%. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from E-House (China) Enterprise Holdings’ five analysts is for revenues of CN¥12.6b in 2020, which would reflect a huge 38% increase on its sales over the past 12 months. Per-share earnings are expected to climb 12% to CN¥0.68. In the lead-up to this report, the analysts had been modelling revenues of CN¥12.6b and earnings per share (EPS) of CN¥1.18 in 2020. So there’s definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
It might be a surprise to learn that the consensus price target fell 16% to CN¥9.34, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. The most optimistic E-House (China) Enterprise Holdings analyst has a price target of CN¥12.32 per share, while the most pessimistic values it at CN¥6.78. 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 E-House (China) Enterprise Holdings shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting E-House (China) Enterprise Holdings’growth to accelerate, with the forecast 38% growth ranking favourably alongside historical growth of 28% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect E-House (China) Enterprise Holdings to grow faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for E-House (China) Enterprise Holdings. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations – and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn’t be too quick to come to a conclusion on E-House (China) Enterprise Holdings. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple E-House (China) Enterprise Holdings analysts – going out to 2022, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 4 warning signs for E-House (China) Enterprise Holdings (1 is concerning!) that you need to be mindful of.
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