Results: Grindwell Norton Limited Exceeded Expectations And The Consensus Has Updated Its Estimates

As you might know, Grindwell Norton Limited (NSE:GRINDWELL) just kicked off its latest second-quarter results with some very strong numbers. Statutory earnings performance was extremely strong, with revenue of ₹4.4b beating expectations by 25% and earnings per share (EPS) of ₹5.81, an impressive 66%ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Grindwell Norton after the latest results.

See our latest analysis for Grindwell Norton

Following last week's earnings report, Grindwell Norton's four analysts are forecasting 2021 revenues to be ₹14.5b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 2.2% to ₹16.65. In the lead-up to this report, the analysts had been modelling revenues of ₹14.8b and earnings per share (EPS) of ₹15.13 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

There's been no major changes to the consensus price target of ₹542, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Grindwell Norton analyst has a price target of ₹598 per share, while the most pessimistic values it at ₹472. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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 0.6% revenue decline a notable change from historical growth of 6.7% 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 Grindwell Norton's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Grindwell Norton following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Grindwell Norton's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Grindwell Norton going out to 2024, and you can see them free on our platform here.

You can also see our analysis of Grindwell Norton's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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