Earnings Release: Here's Why Analysts Cut Their SIIC Environment Holdings Ltd. (SGX:BHK) Price Target To S$0.32

SIIC Environment Holdings Ltd. (SGX:BHK) just released its yearly report and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 3.0% to hit CN¥6.3b. Statutory earnings per share (EPS) came in at CN¥0.25, some 3.1% above whatthe analysts had expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for SIIC Environment Holdings

Taking into account the latest results, the consensus forecast from SIIC Environment Holdings' four analysts is for revenues of CN¥7.04b in 2021, which would reflect a notable 13% improvement in sales compared to the last 12 months. Per-share earnings are expected to step up 11% to CN¥0.27. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥7.05b and earnings per share (EPS) of CN¥0.27 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With no major changes to earnings forecasts, the consensus price target fell 6.8% to S$0.32, suggesting that the analysts might have previously been hoping for an earnings upgrade. 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. The most optimistic SIIC Environment Holdings analyst has a price target of S$0.50 per share, while the most pessimistic values it at S$0.20. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that SIIC Environment Holdings' revenue growth is expected to slow, with forecast 13% increase next year well below the historical 21%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.7% next year. So it's pretty clear that, while SIIC Environment Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for SIIC Environment Holdings going out to 2023, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with SIIC Environment Holdings (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

When trading SIIC Environment Holdings 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.