Shareholders might have noticed that Vincent Medical Holdings Limited (HKG:1612) filed its yearly result this time last week. The early response was not positive, with shares down 6.7% to HK$1.66 in the past week. Results look mixed – while revenue fell marginally short of analyst estimates at HK$1.2b, statutory earnings beat expectations 6.0%, with Vincent Medical Holdings reporting profits of HK$0.33 per share. Earnings are an important time for investors, as they can track a company’s performance, look at what the analyst is forecasting for next year, and see if there’s been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimate suggests is in store for next year.
Following the recent earnings report, the consensus from sole analyst covering Vincent Medical Holdings is for revenues of HK$975.0m in 2021, implying a chunky 16% decline in sales compared to the last 12 months. Statutory earnings per share are expected to dive 40% to HK$0.20 in the same period. Yet prior to the latest earnings, the analyst had been anticipated revenues of HK$1.13b and earnings per share (EPS) of HK$0.21 in 2021. So there’s been a clear change in sentiment after these results, with the analyst making a real cut to revenues and reconfirming their earnings per share estimates.
The analyst has also increased their price target 5.6% to HK$3.79, clearly signalling that lower revenue forecasts next year are not expected to have a material impact on Vincent Medical Holdings’ valuation.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2021. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 26% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Vincent Medical Holdings is expected to lag the wider 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 analyst holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. We note an upgrade to the price target, suggesting that the analyst believes the intrinsic value of the business is likely to improve over time.
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 analyst estimates for Vincent Medical Holdings going out as far as 2023, and you can see them free on our platform here.
You still need to take note of risks, for example – Vincent Medical Holdings has 4 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
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