Earnings Release: Here's Why Analysts Cut Their China Yongda Automobiles Services Holdings Limited (HKG:3669) Price Target To CN¥9.02
The investors in China Yongda Automobiles Services Holdings Limited's (HKG:3669) will be rubbing their hands together with glee today, after the share price leapt 27% to HK$6.73 in the week following its full-year results. Revenues of CN¥63b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at CN¥0.80, missing estimates by 2.2%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China Yongda Automobiles Services Holdings after the latest results.
See our latest analysis for China Yongda Automobiles Services Holdings
After the latest results, the 18 analysts covering China Yongda Automobiles Services Holdings are now predicting revenues of CN¥67.0b in 2020. If met, this would reflect a satisfactory 6.9% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to step up 12% to CN¥0.90. In the lead-up to this report, the analysts had been modelling revenues of CN¥67.6b and earnings per share (EPS) of CN¥0.99 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target fell 5.0% to CN¥9.02, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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. The most optimistic China Yongda Automobiles Services Holdings analyst has a price target of CN¥15.46 per share, while the most pessimistic values it at CN¥6.10. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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 would highlight that China Yongda Automobiles Services Holdings's revenue growth is expected to slow, with forecast 6.9% increase next year well below the historical 14%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% 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 Yongda Automobiles Services Holdings.
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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that China Yongda Automobiles Services Holdings's revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of China Yongda Automobiles Services Holdings's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for China Yongda Automobiles Services Holdings going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with China Yongda Automobiles Services Holdings .
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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