Investors in WCT Holdings Berhad (KLSE:WCT) had a good week, as its shares rose 8.0% to close at RM0.61 following the release of its yearly results. Revenues of RM1.7b beat expectations by 5.0%. Unfortunately statutory earnings per share (EPS) fell well short of the mark, turning in a loss of RM0.14 compared to previous analyst expectations of a profit. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for WCT Holdings Berhad from eleven analysts is for revenues of RM2.18b in 2021 which, if met, would be a major 28% increase on its sales over the past 12 months. WCT Holdings Berhad is also expected to turn profitable, with statutory earnings of RM0.039 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of RM2.09b and earnings per share (EPS) of RM0.039 in 2021. So it looks like there's been no major change in sentiment following the latest results, although the analysts have made a modest lift to to revenue forecasts.
The analysts increased their price target 18% to RM0.55, perhaps signalling that higher revenues are a strong leading indicator for WCT Holdings Berhad's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values WCT Holdings Berhad at RM0.65 per share, while the most bearish prices it at RM0.44. 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 WCT Holdings Berhad shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that WCT Holdings Berhad is forecast to grow faster in the future than it has in the past, with revenues expected to display 28% annualised growth until the end of 2021. If achieved, this would be a much better result than the 0.6% annual decline 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 9.7% per year. So it looks like WCT Holdings Berhad is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on WCT Holdings Berhad. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple WCT Holdings Berhad analysts - going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for WCT Holdings Berhad (of which 1 shouldn't be ignored!) you should know about.
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