Last week saw the newest full-year earnings release from Gadang Holdings Berhad (KLSE:GADANG), an important milestone in the company's journey to build a stronger business. It was not a great result overall. While revenues of RM575m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 17% to hit RM0.014 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from Gadang Holdings Berhad's three analysts is for revenues of RM621.6m in 2022, which would reflect a meaningful 8.1% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 136% to RM0.033. In the lead-up to this report, the analysts had been modelling revenues of RM657.5m and earnings per share (EPS) of RM0.043 in 2022. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.
It'll come as no surprise then, to learn that the analysts have cut their price target 5.1% to RM0.37. 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 Gadang Holdings Berhad at RM0.41 per share, while the most bearish prices it at RM0.31. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Gadang Holdings Berhad's growth to accelerate, with the forecast 8.1% annualised growth to the end of 2022 ranking favourably alongside historical growth of 0.6% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 11% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Gadang Holdings Berhad is expected to grow slower than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Gadang Holdings Berhad. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Gadang Holdings Berhad's future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Gadang Holdings Berhad going out to 2024, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 3 warning signs for Gadang Holdings Berhad you should be aware of, and 1 of them is potentially serious.
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Gadang Holdings Berhad
Gadang Holdings Berhad, an investment holding company, engages in civil engineering and construction, property development, water supply, and mechanical and electrical engineering businesses in Malaysia, Indonesia, and Singapore.
Flawless balance sheet with reasonable growth potential.