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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the current consensus from Top Glove Corporation Bhd's 21 analysts is for revenues of RM5.7b in 2023 which - if met - would reflect a satisfactory 2.9% increase on its sales over the past 12 months. Statutory earnings per share are presumed to swell 10% to RM0.032. Prior to this update, the analysts had been forecasting revenues of RM6.8b and earnings per share (EPS) of RM0.043 in 2023. Indeed, we can see that the analysts are a lot more bearish about Top Glove Corporation Bhd's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 25% to RM0.71. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Top Glove Corporation Bhd at RM1.81 per share, while the most bearish prices it at RM0.45. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Top Glove Corporation Bhd's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 2.9% growth on an annualised basis. This is compared to a historical growth rate of 25% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.1% annually. Factoring in the forecast slowdown in growth, it seems obvious that Top Glove Corporation Bhd is also expected to grow slower than other industry participants.
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 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. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming 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. At Simply Wall St, we have a full range of analyst estimates for Top Glove Corporation Bhd going out to 2025, and you can see them 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.
Top Glove Corporation Bhd
Top Glove Corporation Bhd. engages in the investment holding and provision of management services in Malaysia.
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Flawless balance sheet with reasonable growth potential.