Some Malaysia Smelting Corporation Berhad (KLSE:MSC) Analysts Just Made A Major Cut To Next Year's Estimates

One thing we could say about the analysts on Malaysia Smelting Corporation Berhad (KLSE:MSC) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, Malaysia Smelting Corporation Berhad's four analysts currently expect revenues in 2022 to be RM1.4b, approximately in line with the last 12 months. Statutory earnings per share are supposed to fall 17% to RM0.27 in the same period. Prior to this update, the analysts had been forecasting revenues of RM1.6b and earnings per share (EPS) of RM0.40 in 2022. Indeed, we can see that the analysts are a lot more bearish about Malaysia Smelting Corporation Berhad's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Our analysis indicates that MSC is potentially undervalued!

The consensus price target fell 14% to RM2.79, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Malaysia Smelting Corporation Berhad at RM5.55 per share, while the most bearish prices it at RM1.60. 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. 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.

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. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues to the end of 2022. Historically, Malaysia Smelting Corporation Berhad's sales have shrunk approximately 5.9% annually over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.7% per year. So it's pretty clear that, although revenues are improving, Malaysia Smelting Corporation Berhad is still expected to grow slower than the industry.

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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Malaysia Smelting Corporation Berhad's revenues are expected to grow 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 Malaysia Smelting Corporation Berhad.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Malaysia Smelting Corporation Berhad analysts - going out to 2024, 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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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.