Stock Analysis

The Consensus EPS Estimates For Top Glove Corporation Bhd. (KLSE:TOPGLOV) Just Fell Dramatically

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Today is shaping up negative for Top Glove Corporation Bhd. (KLSE:TOPGLOV) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from Top Glove Corporation Bhd's 21 analysts is for revenues of RM7.1b in 2023 which - if met - would reflect a credible 7.9% increase on its sales over the past 12 months. Statutory earnings per share are supposed to tumble 39% to RM0.056 in the same period. Before this latest update, the analysts had been forecasting revenues of RM7.9b and earnings per share (EPS) of RM0.079 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Top Glove Corporation Bhd

KLSE:TOPGLOV Earnings and Revenue Growth June 14th 2022

It'll come as no surprise then, to learn that the analysts have cut their price target 23% to RM1.17. 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 RM2.50 per share, while the most bearish prices it at RM0.80. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Top Glove Corporation Bhd's past performance and to peers in the same industry. 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 6.3% growth on an annualised basis. This is compared to a historical growth rate of 30% 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 16% 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 most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Top Glove Corporation Bhd.

That said, the analysts might have good reason to be negative on Top Glove Corporation Bhd, given concerns around earnings quality. Learn more, and discover the 4 other risks we've identified, for 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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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.