INOX Leisure Limited (NSE:INOXLEISUR) Analysts Just Cut Their EPS Forecasts Substantially

One thing we could say about the analysts on INOX Leisure Limited (NSE:INOXLEISUR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the ten analysts covering INOX Leisure, is for revenues of ₹5.1b in 2021, which would reflect a substantial 42% reduction in INOX Leisure's sales over the past 12 months. Losses are supposed to balloon 69% to ₹32.20 per share. However, before this estimates update, the consensus had been expecting revenues of ₹7.3b and ₹22.15 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for INOX Leisure

There was no major change to the consensus price target of ₹309, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic INOX Leisure analyst has a price target of ₹356 per share, while the most pessimistic values it at ₹233. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await INOX Leisure shareholders.

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. We would highlight that sales are expected to reverse, with the forecast 42% revenue decline a notable change from historical growth of 6.1% 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 13% next year. It's pretty clear that INOX Leisure's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at INOX Leisure. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that INOX Leisure's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on INOX Leisure after the downgrade.

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 INOX Leisure analysts - going out to 2023, 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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This article by Simply Wall St is general in nature. 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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