Forecast: Analysts Think Zhejiang Expressway Co., Ltd.'s (HKG:576) Business Prospects Have Improved Drastically

Zhejiang Expressway Co., Ltd. (HKG:576) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.

Following the upgrade, the latest consensus from Zhejiang Expressway's five analysts is for revenues of CN¥16b in 2021, which would reflect a sizeable 33% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 49% to CN¥1.03. Prior to this update, the analysts had been forecasting revenues of CN¥14b and earnings per share (EPS) of CN¥0.93 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

See our latest analysis for Zhejiang Expressway

Despite these upgrades, the analysts have not made any major changes to their price target of CN¥7.64, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Zhejiang Expressway analyst has a price target of CN¥9.87 per share, while the most pessimistic values it at CN¥7.77. This is a very narrow spread of estimates, implying either that Zhejiang Expressway is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 Zhejiang Expressway's rate of growth is expected to accelerate meaningfully, with the forecast 33% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 4.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Zhejiang Expressway to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Zhejiang Expressway.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Zhejiang Expressway 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.

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.

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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.
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