MGB Berhad (KLSE:MGB) Analysts Are More Bearish Than They Used To Be

The latest analyst coverage could presage a bad day for MGB Berhad (KLSE:MGB), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from MGB Berhad's twin analysts is for revenues of RM1.1b in 2022, which would reflect a huge 80% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 96% to RM0.08. Previously, the analysts had been modelling revenues of RM1.3b and earnings per share (EPS) of RM0.11 in 2022. Indeed, we can see that the analysts are a lot more bearish about MGB Berhad's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for MGB Berhad

The consensus price target fell 24% to RM0.78, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic MGB Berhad analyst has a price target of RM0.83 per share, while the most pessimistic values it at RM0.72. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting MGB Berhad's growth to accelerate, with the forecast 80% annualised growth to the end of 2022 ranking favourably alongside historical growth of 1.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that MGB Berhad is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of MGB Berhad.

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 MGB Berhad going out as far as 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.