The analysts covering Solarvest Holdings Berhad (KLSE:SLVEST) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following this downgrade, Solarvest Holdings Berhad's three analysts are forecasting 2022 revenues to be RM161m, approximately in line with the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of RM204m in 2022. The consensus view seems to have become more pessimistic on Solarvest Holdings Berhad, noting the pretty serious reduction to revenue estimates in this update.
Notably, the analysts have cut their price target 20% to RM1.19, suggesting concerns around Solarvest Holdings Berhad's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Solarvest Holdings Berhad at RM1.54 per share, while the most bearish prices it at RM1.45. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Solarvest Holdings Berhad is an easy business to forecast or the underlying assumptions are obvious.
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. We would highlight that sales are expected to reverse, with a forecast 1.7% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 23% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 23% annually for the foreseeable future. It's pretty clear that Solarvest Holdings Berhad's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse 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 Solarvest Holdings Berhad's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Solarvest Holdings Berhad after today.
There might be good reason for analyst bearishness towards Solarvest Holdings Berhad, like concerns around earnings quality. Learn more, and discover the 2 other warning signs we've identified, for 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.
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.