Tongcheng-Elong Holdings Limited (HKG:780) Analysts Are Reducing Their Forecasts For This Year
Today is shaping up negative for Tongcheng-Elong Holdings Limited (HKG:780) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. At CN¥10.90, shares are up 8.6% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
After the downgrade, the consensus from Tongcheng-Elong Holdings' twelve analysts is for revenues of CN¥7.0b in 2020, which would reflect a measurable 5.3% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to shrink 3.0% to CN¥0.32 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥8.7b and earnings per share (EPS) of CN¥0.53 in 2020. Indeed, we can see that the analysts are a lot more bearish about Tongcheng-Elong Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Tongcheng-Elong Holdings
The consensus price target fell 8.3% to CN¥13.29, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Tongcheng-Elong Holdings analyst has a price target of CN¥15.59 per share, while the most pessimistic values it at CN¥10.09. 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 Tongcheng-Elong Holdings shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 5.3%, a significant reduction from annual growth of 44% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 21% annually for the foreseeable future. It's pretty clear that Tongcheng-Elong Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Tongcheng-Elong Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Tongcheng-Elong Holdings' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Tongcheng-Elong Holdings analysts - going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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