Time To Worry? Analysts Just Downgraded Their GDEX Berhad (KLSE:GDEX) Outlook

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

Following the downgrade, the consensus from two analysts covering GDEX Berhad is for revenues of RM305m in 2022, implying a stressful 26% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to drop to approximately break-even in the same period. Before this latest update, the analysts had been forecasting revenues of RM454m and earnings per share (EPS) of RM0.27 in 2022. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a earnings per share numbers as well.

View our latest analysis for GDEX Berhad

The consensus price target fell 7.3% to RM0.38, with the analysts clearly less optimistic about GDEX Berhad's valuation following this update. 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. There are some variant perceptions on GDEX Berhad, with the most bullish analyst valuing it at RM0.49 and the most bearish at RM0.20 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2022. This indicates a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.9% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - GDEX Berhad is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on GDEX Berhad after today.

In light of the downgrade, our automated discounted cash flow valuation tool suggests that GDEX Berhad could now be moderately overvalued. You can learn more about our valuation methodology for free on our platform here.

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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.