The analysts covering Huifu Payment Limited (HKG:1806) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the latest consensus from Huifu Payment's three analysts is for revenues of CN¥4.8b in 2020, which would reflect a major 31% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to swell 20% to CN¥0.24. Before this latest update, the analysts had been forecasting revenues of CN¥5.9b and earnings per share (EPS) of CN¥0.28 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a considerable drop in earnings per share numbers as well.
It'll come as no surprise then, to learn that the analysts have cut their price target 9.9% to CN¥4.22. 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 Huifu Payment analyst has a price target of CN¥7.19 per share, while the most pessimistic values it at CN¥2.98. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Huifu Payment's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Huifu Payment'shistorical trends, as next year's 31% revenue growth is roughly in line with 36% annual revenue growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 11% per year. So it's pretty clear that Huifu Payment is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Huifu Payment.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Huifu Payment analysts - going out to 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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