The Consensus EPS Estimates For Gadang Holdings Berhad (KLSE:GADANG) Just Fell A Lot

The analyst covering Gadang Holdings Berhad (KLSE:GADANG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

Following the downgrade, the current consensus from Gadang Holdings Berhad's sole analyst is for revenues of RM723m in 2023 which - if met - would reflect a huge 40% increase on its sales over the past 12 months. Per-share earnings are expected to leap 343% to RM0.029. Prior to this update, the analyst had been forecasting revenues of RM923m and earnings per share (EPS) of RM0.04 in 2023. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Gadang Holdings Berhad

The average price target climbed 6.7% to RM0.32 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

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. For example, we noticed that Gadang Holdings Berhad's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 40% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 0.4% 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 12% per year. So it looks like Gadang Holdings Berhad is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Gadang Holdings Berhad going out as far as 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.