It's been a pretty great week for Hope Education Group Co., Ltd. (HKG:1765) shareholders, with its shares surging 16% to HK$1.78 in the week since its latest full-year results. Hope Education Group reported CN¥1.3b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of CN¥0.072 beat expectations, being 7.7% higher than what the analysts expected. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Hope Education Group's six analysts is for revenues of CN¥1.85b in 2020, which would reflect a substantial 39% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 36% to CN¥0.099. Before this earnings report, the analysts had been forecasting revenues of CN¥1.76b and earnings per share (EPS) of CN¥0.093 in 2020. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥1.73, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Hope Education Group, with the most bullish analyst valuing it at CN¥2.12 and the most bearish at CN¥1.16 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. The analysts are definitely expecting Hope Education Group'sgrowth to accelerate, with the forecast 39% growth ranking favourably alongside historical growth of 24% 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 21% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Hope Education Group to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Hope Education Group following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CN¥1.73, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Hope Education Group going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Hope Education Group (1 makes us a bit uncomfortable) you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.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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