Bearish: Analysts Just Cut Their Supermax Corporation Berhad (KLSE:SUPERMX) Revenue and EPS estimates

Today is shaping up negative for Supermax Corporation Berhad (KLSE:SUPERMX) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.

After this downgrade, Supermax Corporation Berhad's eight analysts are now forecasting revenues of RM1.4b in 2023. This would be a major 20% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 66% to RM0.009. Prior to this update, the analysts had been forecasting revenues of RM1.5b and earnings per share (EPS) of RM0.0073 in 2023. There looks to have been a major change in sentiment regarding Supermax Corporation Berhad's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for Supermax Corporation Berhad

The consensus price target was broadly unchanged at RM0.66, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic Supermax Corporation Berhad analyst has a price target of RM0.87 per share, while the most pessimistic values it at RM0.31. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 20% growth on an annualised basis. That is in line with its 24% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 15% annually. So although Supermax Corporation Berhad is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Supermax Corporation Berhad dropped from profits to a loss this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than 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 Supermax Corporation Berhad.

After a downgrade like this one, it's pretty clear that previous forecasts were too optimistic. Worse, it's possible that the forecast future income could struggle to cover Supermax Corporation Berhad'sdividend payments. You can learn more, and discover the 1 possible risk 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 downgrading their estimates. So you may also wish to search this free list of stocks 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.