Stock Analysis

Analysts Just Shaved Their Top Glove Corporation Bhd. (KLSE:TOPGLOV) Forecasts Dramatically

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Market forces rained on the parade of Top Glove Corporation Bhd. (KLSE:TOPGLOV) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from 20 analysts covering Top Glove Corporation Bhd is for revenues of RM4.1b in 2023, implying an uneasy 11% decline in sales compared to the last 12 months. Losses are supposed to balloon 42% to RM0.023 per share. Before this latest update, the analysts had been forecasting revenues of RM5.5b and earnings per share (EPS) of RM0.027 in 2023. There looks to have been a major change in sentiment regarding Top Glove Corporation Bhd's prospects, with a pretty serious reduction to revenues and the analysts now forecasting a loss instead of a profit.

See our latest analysis for Top Glove Corporation Bhd

KLSE:TOPGLOV Earnings and Revenue Growth December 15th 2022

The consensus price target was broadly unchanged at RM0.64, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. Currently, the most bullish analyst values Top Glove Corporation Bhd at RM1.81 per share, while the most bearish prices it at RM0.32. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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 14% 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 15% annually for the foreseeable future. It's pretty clear that Top Glove Corporation Bhd's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Top Glove Corporation Bhd dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Top Glove Corporation Bhd.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. 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.

Valuation is complex, but we're helping make it simple.

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.