Some Analysts Just Cut Their Riverstone Holdings Limited (SGX:AP4) Estimates

The latest analyst coverage could presage a bad day for Riverstone Holdings Limited (SGX:AP4), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 five analysts covering Riverstone Holdings is for revenues of RM1.5b in 2022, implying a definite 20% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 42% to RM0.23 in the same period. Before this latest update, the analysts had been forecasting revenues of RM1.6b and earnings per share (EPS) of RM0.24 in 2022. 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.

See our latest analysis for Riverstone Holdings

The consensus price target fell 12% to S$0.76, 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. There are some variant perceptions on Riverstone Holdings, with the most bullish analyst valuing it at S$0.82 and the most bearish at S$0.67 per share. This is a very narrow spread of estimates, implying either that Riverstone Holdings is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 20% by the end of 2022. This indicates a significant reduction from annual growth of 31% 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 16% per year. It's pretty clear that Riverstone Holdings' revenues are expected to perform substantially worse than the wider industry.

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 Riverstone Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Riverstone Holdings' revenues are expected to grow 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 Riverstone Holdings after today.

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 Riverstone Holdings' financials, such as the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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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.