It's been a pretty great week for Chervon Holdings Limited (HKG:2285) shareholders, with its shares surging 14% to HK$19.66 in the week since its latest yearly results. It looks like a pretty bad result, given that revenues fell 13% short of analyst estimates at US$1.4b, and the company reported a statutory loss of US$0.07 per share instead of the profit that the analysts had been forecasting. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Chervon Holdings' nine analysts are now forecasting revenues of US$1.58b in 2024. This would be a decent 15% improvement in revenue compared to the last 12 months. Chervon Holdings is also expected to turn profitable, with statutory earnings of US$0.14 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.76b and earnings per share (EPS) of US$0.21 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The analysts made no major changes to their price target of HK$26.61, suggesting the downgrades are not expected to have a long-term impact on Chervon Holdings' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Chervon Holdings, with the most bullish analyst valuing it at HK$46.53 and the most bearish at HK$9.00 per share. 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. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 15% growth on an annualised basis. That is in line with its 13% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 13% per year. So although Chervon Holdings is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. The consensus price target held steady at HK$26.61, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Chervon Holdings analysts - going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Chervon Holdings , and understanding this should be part of your investment process.
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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.