Latest news with #CTOSDigitalBerhad
Yahoo
21-04-2025
- Business
- Yahoo
There Are Reasons To Feel Uneasy About CTOS Digital Berhad's (KLSE:CTOS) Returns On Capital
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at CTOS Digital Berhad (KLSE:CTOS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. Our free stock report includes 1 warning sign investors should be aware of before investing in CTOS Digital Berhad. Read for free now. If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for CTOS Digital Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.12 = RM91m ÷ (RM873m - RM125m) (Based on the trailing twelve months to December 2024). So, CTOS Digital Berhad has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 14% generated by the Professional Services industry. View our latest analysis for CTOS Digital Berhad Above you can see how the current ROCE for CTOS Digital Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for CTOS Digital Berhad . In terms of CTOS Digital Berhad's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 46% over the last five years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run. On a side note, CTOS Digital Berhad has done well to pay down its current liabilities to 14% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE. In summary, despite lower returns in the short term, we're encouraged to see that CTOS Digital Berhad is reinvesting for growth and has higher sales as a result. And there could be an opportunity here if other metrics look good too, because the stock has declined 22% in the last three years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us. On a final note, we've found 1 warning sign for CTOS Digital Berhad that we think you should be aware of. If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
26-02-2025
- Business
- Yahoo
Here's What Analysts Are Forecasting For CTOS Digital Berhad (KLSE:CTOS) Following Its Earnings Miss
CTOS Digital Berhad (KLSE:CTOS) just released its latest annual report and things are not looking great. CTOS Digital Berhad missed analyst forecasts, with revenues of RM305m and statutory earnings per share (EPS) of RM0.046, falling short by 5.5% and 5.3% respectively. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year. Check out our latest analysis for CTOS Digital Berhad After the latest results, the nine analysts covering CTOS Digital Berhad are now predicting revenues of RM348.6m in 2025. If met, this would reflect a decent 14% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to swell 15% to RM0.053. Yet prior to the latest earnings, the analysts had been anticipated revenues of RM380.1m and earnings per share (EPS) of RM0.059 in 2025. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates. Despite the cuts to forecast earnings, there was no real change to the RM1.57 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 CTOS Digital Berhad analyst has a price target of RM1.84 per share, while the most pessimistic values it at RM1.40. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting CTOS Digital Berhad is an easy business to forecast or the the analysts are all using similar assumptions. 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 would highlight that CTOS Digital Berhad's revenue growth is expected to slow, with the forecast 14% annualised growth rate until the end of 2025 being well below the historical 20% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.2% annually. Even after the forecast slowdown in growth, it seems obvious that CTOS Digital Berhad is also expected to grow faster than the wider industry. The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CTOS Digital Berhad. They also downgraded CTOS Digital Berhad's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. The consensus price target held steady at RM1.57, with the latest estimates not enough to have an impact on their price targets. 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 CTOS Digital Berhad analysts - going out to 2027, and you can see them free on our platform here. You should always think about risks though. Case in point, we've spotted 1 warning sign for CTOS Digital Berhad you should be aware of. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Sign in to access your portfolio
Yahoo
12-02-2025
- Business
- Yahoo
CTOS Digital Berhad's (KLSE:CTOS) Intrinsic Value Is Potentially 25% Above Its Share Price
The projected fair value for CTOS Digital Berhad is RM1.50 based on 2 Stage Free Cash Flow to Equity CTOS Digital Berhad's RM1.20 share price signals that it might be 20% undervalued Analyst price target for CTOS is RM1.67, which is 11% above our fair value estimate How far off is CTOS Digital Berhad (KLSE:CTOS) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Believe it or not, it's not too difficult to follow, as you'll see from our example! We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. See our latest analysis for CTOS Digital Berhad We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (MYR, Millions) RM112.5m RM139.6m RM160.5m RM179.1m RM195.5m RM210.1m RM223.4m RM235.6m RM247.2m RM258.4m Growth Rate Estimate Source Analyst x4 Analyst x3 Est @ 14.96% Est @ 11.55% Est @ 9.16% Est @ 7.48% Est @ 6.31% Est @ 5.49% Est @ 4.92% Est @ 4.52% Present Value (MYR, Millions) Discounted @ 8.7% RM103 RM118 RM125 RM128 RM129 RM127 RM125 RM121 RM117 RM112 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM1.2b We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.7%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM258m× (1 + 3.6%) ÷ (8.7%– 3.6%) = RM5.2b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM5.2b÷ ( 1 + 8.7%)10= RM2.3b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is RM3.5b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of RM1.2, the company appears a touch undervalued at a 20% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at CTOS Digital Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.7%, which is based on a levered beta of 0.918. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Weakness Dividend is low compared to the top 25% of dividend payers in the Professional Services market. Opportunity Annual earnings are forecast to grow faster than the Malaysian market. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by cash flow. Revenue is forecast to grow slower than 20% per year. Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For CTOS Digital Berhad, there are three essential factors you should further examine: Risks: As an example, we've found 1 warning sign for CTOS Digital Berhad that you need to consider before investing here. Future Earnings: How does CTOS's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every Malaysian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
