Earnings Update: DRB-HICOM Bhd. (KLSE:DRBHCOM) Just Reported And Analysts Are Boosting Their Estimates

It's been a good week for DRB-HICOM Bhd. (KLSE:DRBHCOM) shareholders, because the company has just released its latest yearly results, and the shares gained 3.4% to RM1.82. Revenues were RM13b, and DRB-HICOM Bhd came in a solid 17% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for DRB-HICOM Bhd

Taking into account the latest results, the current consensus from DRB-HICOM Bhd's five analysts is for revenues of RM14.3b in 2021, which would reflect a meaningful 8.5% increase on its sales over the past 12 months. Earnings are expected to improve, with DRB-HICOM Bhd forecast to report a statutory profit of RM0.13 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of RM13.5b and earnings per share (EPS) of RM0.12 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Despite these upgrades,the analysts have not made any major changes to their price target of RM2.35, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values DRB-HICOM Bhd at RM2.77 per share, while the most bearish prices it at RM2.00. 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.

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. It's clear from the latest estimates that DRB-HICOM Bhd's rate of growth is expected to accelerate meaningfully, with the forecast 8.5% revenue growth noticeably faster than its historical growth of 2.1%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10.0% next year. DRB-HICOM Bhd is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around DRB-HICOM Bhd's earnings potential next year. They also upgraded their revenue forecasts, although the latest estimates suggest that DRB-HICOM Bhd will grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for DRB-HICOM Bhd going out to 2023, and you can see them free on our platform here.

You can also see whether DRB-HICOM Bhd is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

If you decide to trade DRB-HICOM Bhd, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.