It's been a good week for Sun Art Retail Group Limited (HKG:6808) shareholders, because the company has just released its latest annual results, and the shares gained 6.2% to HK$10.70. Sun Art Retail Group missed revenue estimates by 3.9%, with sales of CN¥95b, although statutory earnings per share (EPS) of CN¥0.30 beat expectations, coming in 3.0% ahead of analyst estimates. 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. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Sun Art Retail Group's 17 analysts is for revenues of CN¥102.0b in 2020, which would reflect a modest 6.9% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 7.2% to CN¥0.32. Yet prior to the latest earnings, analysts had been forecasting revenues of CN¥102.8b and earnings per share (EPS) of CN¥0.32 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of CN¥9.35, showing that the business is executing well and in line with expectations. 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 Sun Art Retail Group at CN¥10.65 per share, while the most bearish prices it at CN¥7.22. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's clear from the latest estimates that Sun Art Retail Group's rate of growth is expected to accelerate meaningfully, with forecast 6.9% revenue growth noticeably faster than its historical growth of 0.8%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 7.8% per year. Sun Art Retail Group is expected to grow at about the same rate as its market, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at CN¥9.35, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Sun Art Retail Group going out to 2024, and you can see them free on our platform here..
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