Bearish: Analysts Just Cut Their Mpact Limited (JSE:MPT) Revenue and EPS estimates

One thing we could say about the analysts on Mpact Limited (JSE:MPT) - 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 analysts seeing grey clouds on the horizon.

Following the downgrade, the most recent consensus for Mpact from its twin analysts is for revenues of R13b in 2024 which, if met, would be a modest 2.4% increase on its sales over the past 12 months. Statutory earnings per share are presumed to bounce 41% to R5.16. Before this latest update, the analysts had been forecasting revenues of R15b and earnings per share (EPS) of R5.96 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.

View our latest analysis for Mpact

Despite the cuts to forecast earnings, there was no real change to the R38.30 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

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. It's pretty clear that there is an expectation that Mpact's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.4% growth on an annualised basis. This is compared to a historical growth rate of 4.4% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.4% per year. Factoring in the forecast slowdown in growth, it seems obvious that Mpact 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 Mpact. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Mpact's revenues are expected to grow slower 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 Mpact after the downgrade.

Worse, Mpact is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

We also provide an overview of the Mpact Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.