China Automotive Systems, Inc. (NASDAQ:CAAS) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$74m beat analyst forecasts by33%, while the business broke even in terms of statutory earnings per share (EPS). This is an important time for investors, as they can track a company's performance in its report, look at what expert is 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 estimate to see what could be in store for next year.
Following last week's earnings report, China Automotive Systems' sole analyst are forecasting 2020 revenues to be US$392.9m, approximately in line with the last 12 months. Statutory earnings per share are expected to tumble 60% to US$0.11 in the same period. Yet prior to the latest earnings, the analyst had been forecasting revenues of US$374.8m and losses of US$0.03 per share in 2020. So we can see there's been a pretty clear upgrade to expectations following the latest results, with a modest lift to revenues expected to lead to profitability earlier than previously forecast.
It will come as no surprise to learn that the analyst has increased their price target for China Automotive Systems 67% to US$5.00 on the back of these upgrades.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the China Automotive Systems' past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that China Automotive Systems'decline is expected to accelerate, with revenues forecast to fall 0.7% next year, topping off a historical decline of 0.08% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 10% next year. So it's pretty clear that, while it does have declining revenues, the analyst also expect China Automotive Systems to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analyst now expecting China Automotive Systems to become profitable next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for China Automotive Systems that you should be aware of.
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.
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