Earnings Miss: Greentown Service Group Co. Ltd. Missed EPS By 9.4% And Analysts Are Revising Their Forecasts
Greentown Service Group Co. Ltd. (HKG:2869) shareholders are probably feeling a little disappointed, since its shares fell 7.9% to HK$8.43 in the week after its latest full-year results. Revenues of CN¥8.6b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at CN¥0.17, missing estimates by 9.4%. The 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Greentown Service Group
Taking into account the latest results, the current consensus from Greentown Service Group's 21 analysts is for revenues of CN¥10.6b in 2020, which would reflect a sizeable 24% increase on its sales over the past 12 months. Per-share earnings are expected to jump 32% to CN¥0.22. In the lead-up to this report, the analysts had been modelling revenues of CN¥11.0b and earnings per share (EPS) of CN¥0.25 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the CN¥9.05 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Greentown Service Group, with the most bullish analyst valuing it at CN¥12.78 and the most bearish at CN¥6.84 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.
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. We can infer from the latest estimates that forecasts expect a continuation of Greentown Service Group'shistorical trends, as next year's 24% revenue growth is roughly in line with 26% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 22% next year. It's clear that while Greentown Service Group's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Greentown Service Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Greentown Service Group analysts - going out to 2024, and you can see them free on our platform here.
You can also see our analysis of Greentown Service Group's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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.
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