New Forecasts: Here's What Analysts Think The Future Holds For Shimao Services Holdings Limited (HKG:873)

Shimao Services Holdings Limited (HKG:873) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Shimao Services Holdings will make substantially more sales than they'd previously expected. Investors have been pretty optimistic on Shimao Services Holdings too, with the stock up 26% to HK$17.02 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

Following the upgrade, the current consensus from Shimao Services Holdings' ten analysts is for revenues of CN¥9.2b in 2021 which - if met - would reflect a substantial 187% increase on its sales over the past 12 months. Statutory earnings per share are presumed to soar 97% to CN¥0.54. Before this latest update, the analysts had been forecasting revenues of CN¥8.4b and earnings per share (EPS) of CN¥0.52 in 2021. The most recent forecasts are noticeably more optimistic, with a nice increase in revenue estimates and a lift to earnings per share as well.

See our latest analysis for Shimao Services Holdings

It will come as no surprise to learn that the analysts have increased their price target for Shimao Services Holdings 7.6% to CN¥16.69 on the back of these upgrades. 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 Shimao Services Holdings analyst has a price target of CN¥22.84 per share, while the most pessimistic values it at CN¥10.77. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 Shimao Services Holdings' growth to accelerate, with the forecast 187% annualised growth to the end of 2021 ranking favourably alongside historical growth of 68% per annum over the past year. 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. Factoring in the forecast acceleration in revenue, it's pretty clear that Shimao Services Holdings is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Shimao Services Holdings.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Shimao Services Holdings that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

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