Chervon Holdings Limited Reported A Surprise Loss, And Analysts Have Updated Their Forecasts

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 full-year 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. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Chervon Holdings

After the latest results, the nine analysts covering Chervon Holdings are now predicting revenues of US$1.76b in 2024. If met, this would reflect a major 28% improvement in revenue compared to the last 12 months. Chervon Holdings is also expected to turn profitable, with statutory earnings of US$0.20 per share. In the lead-up to this report, the analysts had been modelling revenues of US$1.76b and earnings per share (EPS) of US$0.24 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at HK$26.29, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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 analysts are definitely expecting Chervon Holdings' growth to accelerate, with the forecast 28% annualised growth to the end of 2024 ranking favourably alongside historical growth of 13% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.0% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Chervon Holdings to grow faster than 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. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at HK$26.29, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Chervon Holdings going out to 2025, 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.