What Does The Future Hold For GHL Systems Berhad (KLSE:GHLSYS)? These Analysts Have Been Cutting Their Estimates

Market forces rained on the parade of GHL Systems Berhad (KLSE:GHLSYS) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following this downgrade, GHL Systems Berhad's five analysts are forecasting 2021 revenues to be RM337m, approximately in line with the last 12 months. Per-share earnings are expected to jump 42% to RM0.032. Prior to this update, the analysts had been forecasting revenues of RM402m and earnings per share (EPS) of RM0.034 in 2021. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

View our latest analysis for GHL Systems Berhad

Despite the cuts to forecast earnings, there was no real change to the RM1.97 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values GHL Systems Berhad at RM2.43 per share, while the most bearish prices it at RM1.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that GHL Systems Berhad's revenue growth is expected to slow, with the forecast 0.2% annualised growth rate until the end of 2021 being well below the historical 9.6% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it seems obvious that GHL Systems Berhad 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 GHL Systems Berhad. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of GHL Systems Berhad going forwards.

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 GHL Systems Berhad going out to 2023, 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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