CSC Financial Co., Ltd. (HKG:6066) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market seems to be pricing in some improvement in the business too, with the stock up 5.6% over the past week, closing at CN¥6.44. Could this big upgrade push the stock even higher?

Following the upgrade, the most recent consensus for CSC Financial from its seven analysts is for revenues of CN¥17b in 2020 which, if met, would be a huge 23% increase on its sales over the past 12 months. Statutory earnings per share are forecast to be CN¥0.68, approximately in line with the last 12 months. Before this latest update, the analysts had been forecasting revenues of CN¥15b and earnings per share (EPS) of CN¥0.61 in 2020. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

Check out our latest analysis for CSC Financial

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CN¥7.05, 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. Currently, the most bullish analyst values CSC Financial at CN¥8.23 per share, while the most bearish prices it at CN¥5.61. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CSC Financial's past performance and to peers in the same industry. For example, we noticed that CSC Financial's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 23%, well above its historical decline of 7.6% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 11% per year. Not only are CSC Financial's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So CSC Financial could be a good candidate for more research.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple CSC Financial analysts - going out to 2022, and you can see them free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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