China Water Affairs Group Limited Just Missed Earnings - But Analysts Have Updated Their Models

Last week, you might have seen that China Water Affairs Group Limited (HKG:855) released its annual result to the market. The early response was not positive, with shares down 4.2% to HK$7.30 in the past week. China Water Affairs Group beat revenue expectations by 7.4%, recording sales of HK$13b. Statutory earnings per share (EPS) came in at HK$1.16, some 7.0% short of analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. 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 China Water Affairs Group

Taking into account the latest results, the most recent consensus for China Water Affairs Group from five analysts is for revenues of HK$14.7b in 2023 which, if met, would be a solid 13% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 21% to HK$1.41. Before this earnings report, the analysts had been forecasting revenues of HK$13.0b and earnings per share (EPS) of HK$1.39 in 2023. It seems sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

It may not be a surprise to see thatthe analysts have reconfirmed their price target of HK$11.13, implying that the uplift in sales is not expected to greatly contribute to China Water Affairs Group's valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values China Water Affairs Group at HK$12.00 per share, while the most bearish prices it at HK$10.40. This is a very narrow spread of estimates, implying either that China Water Affairs Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 13% growth on an annualised basis. That is in line with its 14% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 9.7% per year. So it's pretty clear that China Water Affairs Group is forecast to grow substantially faster than its industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at HK$11.13, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple China Water Affairs Group analysts - going out to 2025, 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 3 warning signs for China Water Affairs Group (1 is a bit concerning!) 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.