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The latest analyst coverage could presage a bad day for Welspun India Limited (NSE:WELSPUNIND), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Welspun India’s five analysts is for revenues of ₹86b in 2023, which would reflect a perceptible 5.4% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plummet 27% to ₹3.00 in the same period. Previously, the analysts had been modelling revenues of ₹101b and earnings per share (EPS) of ₹7.62 in 2023. Indeed, we can see that the analysts are a lot more bearish about Welspun India’s prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Welspun India
It’ll come as no surprise then, to learn that the analysts have cut their price target 17% to ₹100. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. The most optimistic Welspun India analyst has a price target of ₹166 per share, while the most pessimistic values it at ₹73.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 7.1% by the end of 2023. This indicates a significant reduction from annual growth of 8.8% 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 Welspun India’s 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 Welspun India. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Welspun India.
After a downgrade like this, it’s pretty clear that previous forecasts were too optimistic. What’s more, we’ve spotted several possible issues with Welspun India’s business, like its declining profit margins. Learn more, and discover the 2 other warning signs we’ve identified, for free on our platform here.
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.
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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.
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