Stock Analysis

One Analyst's Earnings Estimates For Tung Ho Steel Enterprise Corporation (TPE:2006) Are Surging Higher

TWSE:2006
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Shareholders in Tung Ho Steel Enterprise Corporation (TPE:2006) may be thrilled to learn that the covering analyst has just delivered a major upgrade to their near-term forecasts. The analyst greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 8.3% over the past week, closing at NT$43.50. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the upgrade, the latest consensus from Tung Ho Steel Enterprise's one analyst is for revenues of NT$54b in 2021, which would reflect a major 25% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to climb 17% to NT$4.12. Previously, the analyst had been modelling revenues of NT$48b and earnings per share (EPS) of NT$3.61 in 2021. There has definitely been an improvement in perception recently, with the analyst substantially increasing both their earnings and revenue estimates.

See our latest analysis for Tung Ho Steel Enterprise

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TSEC:2006 Earnings and Revenue Growth March 26th 2021

Although the analyst has upgraded their earnings estimates, there was no change to the consensus price target of NT$43.60, suggesting that the forecast performance does not have a long term impact on the company's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Tung Ho Steel Enterprise analyst has a price target of NT$52.00 per share, while the most pessimistic values it at NT$38.40. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 Tung Ho Steel Enterprise's rate of growth is expected to accelerate meaningfully, with the forecast 25% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 12% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Tung Ho Steel Enterprise is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that the analyst upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster 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 Tung Ho Steel Enterprise.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Tung Ho Steel Enterprise going out as far as 2022, and you can see them free on our platform here.

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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