Kossan Rubber Industries Bhd (KLSE:KOSSAN) Analysts Just Slashed This Year's Estimates

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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the 16 analysts covering Kossan Rubber Industries Bhd provided consensus estimates of RM1.8b revenue in 2023, which would reflect a stressful 21% decline on its sales over the past 12 months. Statutory earnings per share are supposed to crater 83% to RM0.01 in the same period. Previously, the analysts had been modelling revenues of RM2.1b and earnings per share (EPS) of RM0.019 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Kossan Rubber Industries Bhd

Analysts made no major changes to their price target of RM1.11, suggesting the downgrades are not expected to have a long-term impact on Kossan Rubber Industries Bhd's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Kossan Rubber Industries Bhd at RM1.42 per share, while the most bearish prices it at RM0.83. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Kossan Rubber Industries Bhd's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 21% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 20% 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 14% annually for the foreseeable future. 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 biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Kossan Rubber Industries Bhd. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Kossan Rubber Industries Bhd after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Kossan Rubber Industries Bhd 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.