The latest analyst coverage could presage a bad day for Supercomnet Technologies Berhad (KLSE:SCOMNET), with the covering analyst 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 analyst has soured majorly on the business.
Following the downgrade, the current consensus from Supercomnet Technologies Berhad's lone analyst is for revenues of RM179m in 2021 which - if met - would reflect a sizeable 29% increase on its sales over the past 12 months. Per-share earnings are expected to surge 30% to RM0.046. Before this latest update, the analyst had been forecasting revenues of RM228m and earnings per share (EPS) of RM0.052 in 2021. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
The consensus price target fell 6.5% to RM2.15, with the weaker earnings outlook clearly leading analyst valuation estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The period to the end of 2021 brings more of the same, according to the analyst, with revenue forecast to display 29% growth on an annualised basis. That is in line with its 35% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 20% per year. So it's pretty clear that Supercomnet Technologies Berhad is forecast to grow substantially faster than its industry.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Supercomnet Technologies Berhad. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Supercomnet Technologies Berhad going out as far as 2023, 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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