Market forces rained on the parade of PropNex Limited (SGX:OYY) shareholders today, when the analysts downgraded their forecasts for this year.   Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.  

Following the downgrade, the most recent consensus for PropNex from its five analysts is for revenues of S$861m in 2024 which, if met, would be a satisfactory 2.8% increase on its sales over the past 12 months.       Per-share earnings are expected to swell 11% to S$0.072.        Previously, the analysts had been modelling revenues of S$1.0b and earnings per share (EPS) of S$0.087 in 2024.        It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.    

SGX:OYY Earnings and Revenue Growth March 4th 2024

The consensus price target fell 11% to S$1.03, with the weaker earnings outlook clearly leading analyst valuation estimates.      

Of course, another way to look at these forecasts is to place them into context against the industry itself.     It's pretty clear that there is an expectation that PropNex's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.8% growth on an annualised basis. This is compared to a historical growth rate of 21% over the past five years.    Compare this with other companies in the same industry, which are forecast to see a revenue decline of 0.05% annually.  Factoring in the forecast slowdown in growth, it's pretty clear that PropNex is still expected to grow faster 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, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business.        Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.  

With that said, the long-term trajectory of the company's earnings is a lot more important than next year.   We have estimates - from multiple PropNex analysts - going out to 2026, and you can see them 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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