Stock Analysis

These Analysts Just Made A Noticeable Downgrade To Their UMS Holdings Limited (SGX:558) EPS Forecasts

SGX:558
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One thing we could say about the analysts on UMS Holdings Limited (SGX:558) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, the four analysts covering UMS Holdings provided consensus estimates of S$351m revenue in 2023, which would reflect a discernible 5.9% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to drop 15% to S$0.12 in the same period. Before this latest update, the analysts had been forecasting revenues of S$392m and earnings per share (EPS) of S$0.15 in 2023. Indeed, we can see that the analysts are a lot more bearish about UMS Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for UMS Holdings

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SGX:558 Earnings and Revenue Growth March 6th 2023

It'll come as no surprise then, to learn that the analysts have cut their price target 5.9% to S$1.33. 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 UMS Holdings at S$1.57 per share, while the most bearish prices it at S$1.10. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 5.9% by the end of 2023. This indicates a significant reduction from annual growth of 23% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - UMS Holdings 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. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of UMS Holdings.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple UMS Holdings analysts - going out to 2025, and you can see them free on our platform here.

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.

Valuation is complex, but we're helping make it simple.

Find out whether UMS Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.