Last week saw the newest full-year earnings release from BEST Inc. (NYSE:BEST), an important milestone in the company's journey to build a stronger business. Revenues of CN¥35b arrived in line with expectations, although statutory losses per share were CN¥0.52, an impressive 31% smaller than what broker models predicted. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are 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 analysts' statutory forecasts suggest is in store for next year.
Following the latest results, BEST's eight analysts are now forecasting revenues of CN¥40.0b in 2020. This would be a decent 14% improvement in sales compared to the last 12 months. BEST is also expected to turn profitable, with statutory earnings of CN¥1.04 per share. Before this earnings report, analysts had been forecasting revenues of CN¥43.0b and earnings per share (EPS) of CN¥1.03 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The average price target was steady at CN¥43.62 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic BEST analyst has a price target of CN¥56.00 per share, while the most pessimistic values it at CN¥27.13. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
It can also be useful to step back and take a broader view of how analyst forecasts compare to BEST's performance in recent years. We would highlight that BEST's revenue growth is expected to slow, with forecast 14% increase next year well below the historical 36%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.5% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkBEST will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at CN¥43.62, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple BEST analysts - going out to 2023, and you can see them free on our platform here.
It might also be worth considering whether BEST's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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