These Analysts Think Muhibbah Engineering (M) Bhd.'s (KLSE:MUHIBAH) Sales Are Under Threat

Today is shaping up negative for Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Muhibbah Engineering (M) Bhd from its three analysts is for revenues of RM1.1b in 2022 which, if met, would be a major 24% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing RM1.2b of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on Muhibbah Engineering (M) Bhd, given the substantial drop in revenue estimates.

See our latest analysis for Muhibbah Engineering (M) Bhd

The consensus price target fell 11% to RM0.50, with the analysts clearly less optimistic about Muhibbah Engineering (M) Bhd's valuation following this update. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Muhibbah Engineering (M) Bhd analyst has a price target of RM0.57 per share, while the most pessimistic values it at RM0.40. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Muhibbah Engineering (M) Bhd shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Muhibbah Engineering (M) Bhd's past performance and to peers in the same industry. For example, we noticed that Muhibbah Engineering (M) Bhd's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 24% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 10% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 11% annually. Not only are Muhibbah Engineering (M) Bhd's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Muhibbah Engineering (M) Bhd this year. They're also forecasting more rapid revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Muhibbah Engineering (M) Bhd's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Muhibbah Engineering (M) Bhd after today.

Unanswered questions? We have estimates for Muhibbah Engineering (M) Bhd from its three analysts out until 2024, and you can see them free on our platform here.

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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.