Analysts Just Slashed Their Kossan Rubber Industries Bhd (KLSE:KOSSAN) EPS Numbers

The latest analyst coverage could presage a bad day for Kossan Rubber Industries Bhd (KLSE:KOSSAN), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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.

After the downgrade, the consensus from Kossan Rubber Industries Bhd's 18 analysts is for revenues of RM2.2b in 2023, which would reflect a noticeable 5.8% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to tumble 23% to RM0.047 in the same period. Prior to this update, the analysts had been forecasting revenues of RM2.5b and earnings per share (EPS) of RM0.06 in 2023. Indeed, we can see that the analysts are a lot more bearish about Kossan Rubber Industries Bhd's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Kossan Rubber Industries Bhd

It'll come as no surprise then, to learn that the analysts have cut their price target 5.8% to RM1.08. 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 Kossan Rubber Industries Bhd, with the most bullish analyst valuing it at RM1.90 and the most bearish at RM0.75 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 4.7% by the end of 2023. This indicates a significant reduction from annual growth of 20% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% per year. It's pretty clear that Kossan Rubber Industries Bhd'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 earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Kossan Rubber Industries Bhd.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Kossan Rubber Industries Bhd analysts - going out to 2025, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.