The latest analyst coverage could presage a bad day for Hua Yang Berhad (KLSE:HUAYANG), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
Following the downgrade, the consensus from single analyst covering Hua Yang Berhad is for revenues of RM117m in 2022, implying a concerning 25% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 95% to RM0.01. Before this latest update, the analyst had been forecasting revenues of RM160m and earnings per share (EPS) of RM0.005 in 2022. So we can see that the consensus has become notably more bearish on Hua Yang Berhad's outlook with these numbers, making a pretty serious reduction to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 18% to RM0.31, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 15% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 25% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 9.7% annually. So it's pretty clear that, while it does have declining revenues, the analyst also expect Hua Yang Berhad to suffer worse than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Hua Yang Berhad dropped from profits to a loss this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Hua Yang Berhad's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Hua Yang Berhad.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Hua Yang Berhad's mountain of debt, which could lead to some belt tightening for shareholders. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
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.