Brokers Are Upgrading Their Views On Orient Overseas (International) Limited (HKG:316) With These New Forecasts

Celebrations may be in order for Orient Overseas (International) Limited (HKG:316) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 9.7% to HK$185 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the upgrade, the latest consensus from Orient Overseas (International)'s dual analysts is for revenues of US$15b in 2021, which would reflect a sizeable 78% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 520% to US$8.94. Before this latest update, the analysts had been forecasting revenues of US$12b and earnings per share (EPS) of US$5.89 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for Orient Overseas (International)

With these upgrades, we're not surprised to see that the analysts have lifted their price target 23% to US$24.66 per share. 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 Orient Overseas (International), with the most bullish analyst valuing it at US$224 and the most bearish at US$78.70 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Orient Overseas (International)'s past performance and to peers in the same industry. The analysts are definitely expecting Orient Overseas (International)'s growth to accelerate, with the forecast 78% annualised growth to the end of 2021 ranking favourably alongside historical growth of 7.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 0.9% per year. It seems obvious that as part of the brighter growth outlook, Orient Overseas (International) is expected to grow faster than the wider 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. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Orient Overseas (International) could be worth investigating further.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Orient Overseas (International) going out as far as 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.