Fu Yu Corporation Limited (SGX:F13) shares fell 3.8% to S$0.25 in the week since its latest yearly results. Results look mixed - while revenue fell marginally short of analyst estimates at S$194m, statutory earnings were in line with expectations, at S$0.017 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the recent earnings report, the consensus fromthree analysts covering Fu Yu expects revenues of S$186.5m in 2020, implying a discernible 3.9% decline in sales compared to the last 12 months. Statutory earnings per share are expected to jump 57% to S$0.027. In the lead-up to this report, analysts had been modelling revenues of S$209.0m and earnings per share (EPS) of S$0.023 in 2020. There's been a definite change in sentiment after these results, with analysts administering a a discernible to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is forecast to reduce its focus on growth to enhance profitability.
There's been no real change to the average price target of S$0.30, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Fu Yu at S$0.35 per share, while the most bearish prices it at S$0.22. 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 Fu Yu shareholders.
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. Over the past five years, revenues have declined around 5.2% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 3.9% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 0.3% next year. So while it's not great to see that analysts are expecting a decline, at least Fu Yu is forecast to shrink at a slower rate than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Fu Yu following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, earnings are more important to the long-term value of the business. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Fu Yu going out to 2022, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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