China Everbright Water Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

China Everbright Water Limited (SGX:U9E) last week reported its latest yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at HK$5.7b, statutory earnings beat expectations by a notable 13%, coming in at HK$0.36 per share. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for China Everbright Water

After the latest results, the five analysts covering China Everbright Water are now predicting revenues of HK$6.26b in 2021. If met, this would reflect a meaningful 10% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 5.4% to HK$0.38. In the lead-up to this report, the analysts had been modelling revenues of HK$6.61b and earnings per share (EPS) of HK$0.36 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been no real change to the average price target of HK$1.72, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. The most optimistic China Everbright Water analyst has a price target of HK$0.34 per share, while the most pessimistic values it at HK$0.25. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that China Everbright Water's revenue growth will slow down substantially, with revenues next year expected to grow 10%, compared to a historical growth rate of 22% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.4% next year. Factoring in the forecast slowdown in growth, it looks like China Everbright Water is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around China Everbright Water's earnings potential next year. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at HK$1.72, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on China Everbright Water. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for China Everbright Water going out to 2023, 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 2 warning signs for China Everbright Water (1 shouldn't be ignored!) that you need to be mindful of.

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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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