A week ago, PropNex Limited (SGX:OYY) came out with a strong set of full-year numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of S$516m arriving 6.1% ahead of forecasts. Statutory earnings per share (EPS) were S$0.079, 7.1% ahead of 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.
Taking into account the latest results, PropNex's three analysts currently expect revenues in 2021 to be S$513.4m, approximately in line with the last 12 months. Statutory earnings per share are expected to decline 15% to S$0.067 in the same period. In the lead-up to this report, the analysts had been modelling revenues of S$488.7m and earnings per share (EPS) of S$0.056 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a substantial gain in earnings per share in particular.
It will come as no surprise to learn that the analysts have increased their price target for PropNex 5.6% to S$0.90on the back of these upgrades. 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. There are some variant perceptions on PropNex, with the most bullish analyst valuing it at S$0.89 and the most bearish at S$0.85 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 0.4% revenue decline a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - PropNex is expected to lag the wider industry.
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 PropNex following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on PropNex. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple PropNex analysts - going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for PropNex (1 doesn't sit too well with us!) that you should be aware of.
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