Investors in Tongcheng-Elong Holdings Limited (HKG:780) had a good week, as its shares rose 3.9% to close at HK$13.30 following the release of its quarterly results. Tongcheng-Elong Holdings beat revenue expectations by 2.5%, recording sales of CN¥1.0b. Statutory earnings per share (EPS) came in at CN¥0.33, some 9.8% short of analyst estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, Tongcheng-Elong Holdings' 13 analysts currently expect revenues in 2020 to be CN¥6.61b, approximately in line with the last 12 months. Statutory earnings per share are forecast to sink 19% to CN¥0.27 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥6.79b and earnings per share (EPS) of CN¥0.32 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
The analysts made no major changes to their price target of CN¥14.66, suggesting the downgrades are not expected to have a long-term impact on Tongcheng-Elong Holdings'valuation. 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. There are some variant perceptions on Tongcheng-Elong Holdings, with the most bullish analyst valuing it at CN¥18.39 and the most bearish at CN¥14.57 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.06%, a significant reduction from annual growth of 4.0% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 19% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Tongcheng-Elong Holdings is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Tongcheng-Elong Holdings. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at CN¥14.66, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Tongcheng-Elong Holdings analysts - going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Tongcheng-Elong Holdings that you should be aware of.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.