China East Education Holdings Limited (HKG:667) missed earnings with its latest annual results, disappointing overly-optimistic forecasters. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CN¥4.0b, statutory earnings missed forecasts by an incredible 36%, coming in at just CN¥0.12 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from China East Education Holdings' ten analysts is for revenues of CN¥4.39b in 2024. This would reflect a meaningful 10% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to bounce 106% to CN¥0.26. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥4.91b and earnings per share (EPS) of CN¥0.29 in 2024. It looks like sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.
The analysts made no major changes to their price target of HK$4.89, suggesting the downgrades are not expected to have a long-term impact on China East Education Holdings' valuation. 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 China East Education Holdings analyst has a price target of HK$8.00 per share, while the most pessimistic values it at HK$3.09. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. The analysts are definitely expecting China East Education Holdings' growth to accelerate, with the forecast 10% annualised growth to the end of 2024 ranking favourably alongside historical growth of 2.6% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 16% annually. So it's clear that despite the acceleration in growth, China East Education Holdings is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for China East Education Holdings. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 China East Education Holdings analysts - going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for China East Education Holdings 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.