Results: Evergrande Property Services Group Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

It's been a good week for Evergrande Property Services Group Limited (HKG:6666) shareholders, because the company has just released its latest annual results, and the shares gained 3.3% to HK$15.48. Evergrande Property Services Group missed revenue estimates by 2.6%, with sales of CN¥11b, although statutory earnings per share (EPS) of CN¥0.26 beat expectations, coming in 9.7% ahead of analyst estimates. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Evergrande Property Services Group

After the latest results, the seven analysts covering Evergrande Property Services Group are now predicting revenues of CN¥17.7b in 2021. If met, this would reflect a substantial 69% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 52% to CN¥0.40. In the lead-up to this report, the analysts had been modelling revenues of CN¥16.9b and earnings per share (EPS) of CN¥0.37 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

Despite these upgrades,the analysts have not made any major changes to their price target of CN¥18.41, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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 Evergrande Property Services Group at CN¥31.48 per share, while the most bearish prices it at CN¥9.35. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Evergrande Property Services Group's rate of growth is expected to accelerate meaningfully, with the forecast 69% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 25% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Evergrande Property Services Group to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Evergrande Property Services Group's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Evergrande Property Services Group going out to 2023, and you can see them free on our platform here..

Before you take the next step you should know about the 1 warning sign for Evergrande Property Services Group that we have uncovered.

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