Investors in HRnetGroup Limited (SGX:CHZ) had a good week, as its shares rose 4.3% to close at S$0.73 following the release of its annual results. Revenues S$578m disappointed slightly, at2.8% below what the analysts had predicted. Profits were a relative bright spot, with statutory per-share earnings of S$0.064 coming in 13% above what was anticipated. Following the result, the 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, HRnetGroup's three analysts are forecasting 2024 revenues to be S$581.8m, approximately in line with the last 12 months. Per-share earnings are expected to rise 3.7% to S$0.067. Yet prior to the latest earnings, the analysts had been anticipated revenues of S$625.4m and earnings per share (EPS) of S$0.063 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The consensus price target fell 5.6% to S$0.85, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values HRnetGroup at S$0.91 per share, while the most bearish prices it at S$0.80. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that HRnetGroup's revenue growth is expected to slow, with the forecast 0.6% annualised growth rate until the end of 2024 being well below the historical 9.5% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.2% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than HRnetGroup.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around HRnetGroup's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on HRnetGroup. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple HRnetGroup analysts - going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for HRnetGroup (1 is a bit concerning!) that we have uncovered.
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