Downgrade: Here's How Analysts See Hartalega Holdings Berhad (KLSE:HARTA) Performing In The Near Term

The analysts covering Hartalega Holdings Berhad (KLSE:HARTA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the consensus from Hartalega Holdings Berhad's 20 analysts is for revenues of RM3.4b in 2023, which would reflect a painful 31% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to nosedive 60% to RM0.13 in the same period. Before this latest update, the analysts had been forecasting revenues of RM4.0b and earnings per share (EPS) of RM0.19 in 2023. Indeed, we can see that the analysts are a lot more bearish about Hartalega Holdings Berhad's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Hartalega Holdings Berhad

The consensus price target fell 26% to RM2.92, 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 Hartalega Holdings Berhad, with the most bullish analyst valuing it at RM5.80 and the most bearish at RM1.86 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 31% by the end of 2023. This indicates a significant reduction from annual growth of 32% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.1% annually for the foreseeable future. So it's pretty clear that Hartalega Holdings Berhad's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Hartalega Holdings Berhad. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Hartalega Holdings Berhad revenue is expected to perform worse than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Hartalega Holdings Berhad.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Hartalega Holdings Berhad analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.