Baba Stock – Earnings Report: Alibaba Health Information Technology Limited Missed Revenue Estimates By 6.8%
Last week, you might have seen that Alibaba Health Information Technology Limited (HKG:241) released its yearly result to the market. The early response was not positive, with shares down 4.6% to HK$20.60 in the past week. Revenues came in 6.8% below expectations, at CN¥16b. Statutory earnings per share were relatively better off, with a per-share profit of CN¥0.026 being roughly in line with analyst estimates. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for Alibaba Health Information Technology
After the latest results, the twelve analysts covering Alibaba Health Information Technology are now predicting revenues of CN¥25.0b in 2022. If met, this would reflect a major 61% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 95% to CN¥0.051. In the lead-up to this report, the analysts had been modelling revenues of CN¥26.6b and earnings per share (EPS) of CN¥0.049 in 2022. So it’s pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company’s earnings power.
The analysts have cut their price target 5.5% to CN¥24.68per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. 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. Currently, the most bullish analyst values Alibaba Health Information Technology at CN¥50.15 per share, while the most bearish prices it at CN¥26.61. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Alibaba Health Information Technology’shistorical trends, as the 61% annualised revenue growth to the end of 2022 is roughly in line with the 60% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 21% per year. So although Alibaba Health Information Technology is expected to maintain its revenue growth rate, it’s definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Alibaba Health Information Technology following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Alibaba Health Information Technology’s future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Alibaba Health Information Technology analysts – going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we’ve discovered 3 warning signs for Alibaba Health Information Technology that you should be aware of.
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