Need To Know: Analysts Just Made A Substantial Cut To Their Fortis Healthcare Limited (NSE:FORTIS) Estimates

Market forces rained on the parade of Fortis Healthcare Limited (NSE:FORTIS) shareholders today, when the analysts downgraded their forecasts for this year. 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 five analysts covering Fortis Healthcare, is for revenues of ₹41b in 2021, which would reflect an uneasy 13% reduction in Fortis Healthcare's sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of ₹0.55 per share in 2021. Before this latest update, the analysts had been forecasting revenues of ₹47b and earnings per share (EPS) of ₹1.22 in 2021. So we can see that the consensus has become notably more bearish on Fortis Healthcare's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

Check out our latest analysis for Fortis Healthcare

The consensus price target was broadly unchanged at ₹160, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Fortis Healthcare, with the most bullish analyst valuing it at ₹170 and the most bearish at ₹153 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Fortis Healthcare is an easy business to forecast or the underlying assumptions are obvious.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Fortis Healthcare's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 2.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. It's pretty clear that Fortis Healthcare's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Fortis Healthcare dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Fortis Healthcare.

Uncomfortably, our automated valuation tool also suggests that Fortis Healthcare stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. Find out why, and see how we estimate the valuation for free on our platform here.

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