The latest analyst coverage could presage a bad day for NagaCorp Ltd. (HKG:3918), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the four analysts covering NagaCorp are now predicting revenues of US$719m in 2023. If met, this would reflect a major 65% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$873m in 2023. The consensus view seems to have become more pessimistic on NagaCorp, noting the measurable cut to revenue estimates in this update.

See our latest analysis for NagaCorp

We'd point out that there was no major changes to their price target of US$1.01, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic NagaCorp analyst has a price target of US$10.22 per share, while the most pessimistic values it at US$5.50. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. For example, we noticed that NagaCorp's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 65% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 26% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 32% per year. So it looks like NagaCorp is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for NagaCorp this year. They're also forecasting more rapid revenue growth than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of NagaCorp going forwards.

Need some more information? At least one of NagaCorp's four analysts has provided estimates out to 2025, which can be seen for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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