The latest analyst coverage could presage a bad day for Riverstone Holdings Limited (SGX:AP4), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from Riverstone Holdings' five analysts is for revenues of RM1.5b in 2022, which would reflect an uncomfortable 20% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to plummet 42% to RM0.23 in the same period. Prior to this update, the analysts had been forecasting revenues of RM1.6b and earnings per share (EPS) of RM0.24 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a minor downgrade to earnings per share numbers as well.

Check out our latest analysis for Riverstone Holdings

It'll come as no surprise then, to learn that the analysts have cut their price target 12% to S$0.76. 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. There are some variant perceptions on Riverstone Holdings, with the most bullish analyst valuing it at S$0.82 and the most bearish at S$0.74 per share. 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 annualised revenue decline of 20% by the end of 2022. This indicates a significant reduction from annual growth of 31% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% per year. It's pretty clear that Riverstone Holdings' revenues are expected to perform substantially worse than the wider industry.

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 Riverstone Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Riverstone Holdings' revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Riverstone Holdings' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Riverstone Holdings after today.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Riverstone Holdings' financials, such as the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other concern we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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.