Bearish: Analysts Just Cut Their Power Root Berhad (KLSE:PWROOT) Revenue and EPS estimates

One thing we could say about the analysts on Power Root Berhad (KLSE:PWROOT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Power Root Berhad from its four analysts is for revenues of RM339m in 2022 which, if met, would be a solid 8.5% increase on its sales over the past 12 months. Per-share earnings are expected to expand 15% to RM0.077. Prior to this update, the analysts had been forecasting revenues of RM383m and earnings per share (EPS) of RM0.11 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Power Root Berhad

The consensus price target fell 25% to RM1.61, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on Power Root Berhad, with the most bullish analyst valuing it at RM1.90 and the most bearish at RM1.21 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. For example, we noticed that Power Root Berhad's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 8.5% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 2.8% 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 7.6% annually. So it looks like Power Root Berhad is expected to grow at about the same rate as the wider 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Power Root Berhad.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Power Root Berhad going out to 2024, 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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This article by Simply Wall St is general in nature. 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.
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