Investors in Axiata Group Berhad (KLSE:AXIATA) had a good week, as its shares rose 9.6% to close at RM3.09 following the release of its third-quarter results. The results don't look great, especially considering that the analysts had been forecasting a profit and Axiata Group Berhad delivered a statutory loss of RM0.006 per share. Revenues of RM7.3b did beat expectations by 5.2% though. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Axiata Group Berhad's 18 analysts is for revenues of RM28.1b in 2023, which would reflect a credible 2.8% increase on its sales over the past 12 months. Earnings are expected to improve, with Axiata Group Berhad forecast to report a statutory profit of RM0.17 per share. In the lead-up to this report, the analysts had been modelling revenues of RM27.3b and earnings per share (EPS) of RM0.17 in 2023. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
Despite these upgrades,the analysts have not made any major changes to their price target of RM3.77, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. The most optimistic Axiata Group Berhad analyst has a price target of RM5.70 per share, while the most pessimistic values it at RM2.80. 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.
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. We can infer from the latest estimates that forecasts expect a continuation of Axiata Group Berhad'shistorical trends, as the 2.2% annualised revenue growth to the end of 2023 is roughly in line with the 2.0% annual revenue growth over the past five years. Compare this with the broader industry (in aggregate), which analyst estimates suggest will see revenues grow 4.8% annually. So it's pretty clear that Axiata Group Berhad is expected to grow slower than similar companies in the same industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Axiata Group Berhad's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target held steady at RM3.77, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Axiata Group Berhad going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Axiata Group Berhad has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here