News Flash: 2 Analysts Think Koufu Group Limited (SGX:VL6) Earnings Are Under Threat

Today is shaping up negative for Koufu Group Limited (SGX:VL6) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the consensus from dual analysts covering Koufu Group is for revenues of S$205m in 2020, implying a considerable 14% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 21% to S$0.039 in the same period. Previously, the analysts had been modelling revenues of S$256m and earnings per share (EPS) of S$0.051 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Koufu Group

SGX:VL6 Past and Future Earnings April 27th 2020
SGX:VL6 Past and Future Earnings April 27th 2020

It'll come as no surprise then, to learn that the analysts have cut their price target 17% to S$0.69. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Koufu Group at S$0.69 per share, while the most bearish prices it at S$0.68. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 14%, a significant reduction from annual growth of 3.6% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.7% next year. It's pretty clear that Koufu Group's revenues are expected to perform substantially worse than 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Koufu Group's revenues are expected to grow 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 Koufu Group.