Stock Analysis

Results: VSTECS Holdings Limited Beat Earnings Expectations And Analysts Now Have New Forecasts

SEHK:856
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Investors in VSTECS Holdings Limited (HKG:856) had a good week, as its shares rose 2.6% to close at HK$7.13 following the release of its yearly results. It looks like a credible result overall - although revenues of HK$70b were in line with what the analysts predicted, VSTECS Holdings surprised by delivering a statutory profit of HK$0.75 per share, a notable 15% above expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on VSTECS Holdings after the latest results.

Check out our latest analysis for VSTECS Holdings

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SEHK:856 Earnings and Revenue Growth March 28th 2021

Taking into account the latest results, the current consensus from VSTECS Holdings' dual analysts is for revenues of HK$73.4b in 2021, which would reflect a reasonable 4.9% increase on its sales over the past 12 months. Per-share earnings are expected to accumulate 5.9% to HK$0.80. In the lead-up to this report, the analysts had been modelling revenues of HK$76.5b and earnings per share (EPS) of HK$0.75 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

The average price target rose 13% to HK$7.91, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the VSTECS Holdings' past performance and to peers in the same industry. It's pretty clear that there is an expectation that VSTECS Holdings' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 4.9% growth on an annualised basis. This is compared to a historical growth rate of 9.1% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 13% annually. Factoring in the forecast slowdown in growth, it seems obvious that VSTECS Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards VSTECS Holdings following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Yet - earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for VSTECS Holdings that you should be aware of.

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