Investors in Sinotrans Limited (HKG:598) had a good week, as its shares rose 4.6% to close at HK$2.28 following the release of its interim results. Revenues were CN¥55b, 15% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of CN¥0.50 being in line with what the analysts anticipated. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Sinotrans

Taking into account the latest results, the current consensus, from the seven analysts covering Sinotrans, is for revenues of CN¥108.9b in 2022, which would reflect a discernible 7.6% reduction in Sinotrans' sales over the past 12 months. Statutory per-share earnings are expected to be CN¥0.53, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of CN¥124.5b and earnings per share (EPS) of CN¥0.51 in 2022. Indeed we can see that the consensus opinion has undergone some fundamental changes after the latest results, with a real cut to revenues at the same time as boosting EPS forecasts.

The consensus has made no major changes to the price target of HK$3.41, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Sinotrans analyst has a price target of HK$3.93 per share, while the most pessimistic values it at HK$2.90. 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 Sinotrans shareholders.

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. We would highlight that sales are expected to reverse, with a forecast 15% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 12% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 12% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sinotrans is expected to lag the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Sinotrans following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at HK$3.41, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Sinotrans. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Sinotrans analysts - going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Sinotrans that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.