This Just In: Analysts Are Boosting Their Kossan Rubber Industries Bhd (KLSE:KOSSAN) Outlook for This Year

Shareholders in Kossan Rubber Industries Bhd (KLSE:KOSSAN) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on Kossan Rubber Industries Bhd too, with the stock up 13% to RM4.35 over the past week. Could this upgrade be enough to drive the stock even higher?

After this upgrade, Kossan Rubber Industries Bhd's 17 analysts are now forecasting revenues of RM8.1b in 2021. This would be a sizeable 54% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 65% to RM1.33. Previously, the analysts had been modelling revenues of RM7.0b and earnings per share (EPS) of RM0.98 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for Kossan Rubber Industries Bhd

Despite these upgrades, the consensus price target fell 13% to RM5.35, perhaps signalling that the uplift in performance is not expected to last. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Kossan Rubber Industries Bhd analyst has a price target of RM6.60 per share, while the most pessimistic values it at RM3.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. The analysts are definitely expecting Kossan Rubber Industries Bhd's growth to accelerate, with the forecast 78% annualised growth to the end of 2021 ranking favourably alongside historical growth of 17% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Kossan Rubber Industries Bhd is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The declining price target is a puzzle, but still - with a serious upgrade to this year's expectations, it might be time to take another look at Kossan Rubber Industries Bhd.

Analysts are definitely bullish on Kossan Rubber Industries Bhd, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including concerns around earnings quality. You can learn more, and discover the 2 other warning signs we've identified, for 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you decide to trade Kossan Rubber Industries Bhd, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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