Shimao Services Holdings Limited Recorded A 18% Miss On Revenue: Analysts Are Revisiting Their Models

Shimao Services Holdings Limited (HKG:873) just released its latest annual report and things are not looking great. It looks like a weak result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of CN¥7.7b missed by 18%, and statutory earnings per share of CN¥0.47 fell short of forecasts by 5.1%. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Shimao Services Holdings

After the latest results, the 13 analysts covering Shimao Services Holdings are now predicting revenues of CN¥13.0b in 2022. If met, this would reflect a sizeable 69% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 53% to CN¥0.63. Before this earnings report, the analysts had been forecasting revenues of CN¥13.3b and earnings per share (EPS) of CN¥0.64 in 2022. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The average price target was steady at HK$6.90even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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 HK$11.06 per share, while the most pessimistic values it at HK$3.13. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Shimao Services Holdings' revenue growth is expected to slow, with the forecast 69% annualised growth rate until the end of 2022 being well below the historical 140% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.7% per year. Even after the forecast slowdown in growth, it seems obvious that Shimao Services Holdings is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also downgraded their revenue estimates, although industry data suggests that Shimao Services Holdings' revenues are expected to grow faster than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at HK$6.90, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Shimao Services Holdings. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Shimao Services Holdings going out to 2024, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 2 warning signs for Shimao Services Holdings that you need to be mindful 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.