Frencken Group Limited (SGX:E28) shares fell 5.7% to S$0.83 in the week since its latest annual results. The result was positive overall – although revenues of S$659m were in line with what analysts predicted, Frencken Group surprised by delivering a statutory profit of S$0.10 per share, modestly greater than expected. 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. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Frencken Group after the latest results.
Check out our latest analysis for Frencken Group
SGX:E28 Past and Future Earnings, March 1st 2020
Taking into account the latest results, the current consensus from Frencken Group’s four analysts is for revenues of S$699.7m in 2020, which would reflect a satisfactory 6.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 2.3% to S$0.10. In the lead-up to this report, analysts had been modelling revenues of S$699.0m and earnings per share (EPS) of S$0.096 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 5.2% to S$1.01, suggesting that higher earnings estimates flow through to the stock’s valuation as well. 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 Frencken Group at S$1.06 per share, while the most bearish prices it at S$0.91. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Frencken Group’s performance in recent years. It’s pretty clear that analysts expect Frencken Group’s revenue growth will slow down substantially, with revenues next year expected to grow 6.1%, compared to a historical growth rate of 9.0% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 0.09% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkFrencken Group will grow faster than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Frencken Group’s earnings potential next year. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Frencken Group. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Frencken Group analysts – going out to 2022, and you can see them free on our platform here.