UEM Edgenta Berhad (KLSE:EDGENTA) Analysts Just Trimmed Their Revenue Forecasts By 10%

Market forces rained on the parade of UEM Edgenta Berhad (KLSE:EDGENTA) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following this downgrade, UEM Edgenta Berhad's three analysts are forecasting 2020 revenues to be RM2.2b, approximately in line with the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of RM2.4b in 2020. It looks like forecasts have become a fair bit less optimistic on UEM Edgenta Berhad, given the measurable cut to revenue estimates.

View our latest analysis for UEM Edgenta Berhad

The consensus price target fell 22% to RM2.23, with the analysts clearly less optimistic about UEM Edgenta Berhad's valuation following this update. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic UEM Edgenta Berhad analyst has a price target of RM3.23 per share, while the most pessimistic values it at RM2.63. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

Of course, another way to look at these forecasts is to place them into context against the industry itself. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 11% next year. So it's pretty clear that, although revenues are improving, UEM Edgenta Berhad is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on UEM Edgenta Berhad after today.

Unanswered questions? At least one of UEM Edgenta Berhad's three analysts has provided estimates out to 2022, which can be seen for free on our platform here.

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