Stock Analysis

Analysts Are More Bearish On Top Glove Corporation Bhd. (KLSE:TOPGLOV) Than They Used To Be

KLSE:TOPGLOV
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The analysts covering Top Glove Corporation Bhd. (KLSE:TOPGLOV) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. 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. Investors however, have been notably more optimistic about Top Glove Corporation Bhd recently, with the stock price up an incredible 31% to RM0.92 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the current consensus, from the 20 analysts covering Top Glove Corporation Bhd, is for revenues of RM3.3b in 2023, which would reflect an uncomfortable 12% reduction in Top Glove Corporation Bhd's sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching RM0.053. Yet prior to the latest estimates, the analysts had been forecasting revenues of RM3.7b and losses of RM0.027 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Top Glove Corporation Bhd

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KLSE:TOPGLOV Earnings and Revenue Growth March 17th 2023

The consensus price target lifted 18% to RM0.68, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. 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. Currently, the most bullish analyst values Top Glove Corporation Bhd at RM1.05 per share, while the most bearish prices it at RM0.45. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. We would highlight that sales are expected to reverse, with a forecast 22% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 15% 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 14% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Top Glove Corporation Bhd is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Top Glove Corporation Bhd. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Top Glove Corporation 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 Top Glove Corporation Bhd analysts - 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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Find out whether Top Glove Corporation Bhd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.