Time To Worry? Analysts Are Downgrading Their UOA Development Bhd (KLSE:UOADEV) Outlook

The latest analyst coverage could presage a bad day for UOA Development Bhd (KLSE:UOADEV), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After this downgrade, UOA Development Bhd's five analysts are now forecasting revenues of RM655m in 2021. This would be a credible 7.5% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 31% to RM0.10 in the same period. Before this latest update, the analysts had been forecasting revenues of RM801m and earnings per share (EPS) of RM0.12 in 2021. Indeed, we can see that the analysts are a lot more bearish about UOA Development Bhd's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for UOA Development Bhd

Analysts made no major changes to their price target of RM1.87, suggesting the downgrades are not expected to have a long-term impact on UOA Development Bhd's 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 UOA Development Bhd at RM2.44 per share, while the most bearish prices it at RM1.76. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that UOA Development Bhd's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 7.5% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 6.3% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 5.8% annually. Not only are UOA Development Bhd's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider 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, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on UOA Development Bhd after the downgrade.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with UOA Development Bhd's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other risks we've identified.

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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