The Consensus EPS Estimates For KPJ Healthcare Berhad (KLSE:KPJ) Just Fell Dramatically

One thing we could say about the analysts on KPJ Healthcare Berhad (KLSE:KPJ) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the 14 analysts covering KPJ Healthcare Berhad are now predicting revenues of RM2.5b in 2021. If met, this would reflect a decent 8.6% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to jump 61% to RM0.032. Before this latest update, the analysts had been forecasting revenues of RM3.0b and earnings per share (EPS) of RM0.038 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for KPJ Healthcare Berhad

Despite the cuts to forecast earnings, there was no real change to the RM1.12 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic KPJ Healthcare Berhad analyst has a price target of RM1.23 per share, while the most pessimistic values it at RM0.98. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

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. One thing stands out from these estimates, which is that KPJ Healthcare Berhad is forecast to grow faster in the future than it has in the past, with revenues expected to display 12% annualised growth until the end of 2021. If achieved, this would be a much better result than the 3.8% annual decline 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 10% annually. So while KPJ Healthcare Berhad's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall 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 KPJ Healthcare Berhad. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of KPJ Healthcare Berhad.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with KPJ Healthcare Berhad's financials, such as its declining profit margins. Learn more, and discover the 1 other concern we've identified, for free on our platform here.

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