The analysts covering Apcotex Industries Limited (NSE:APCOTEXIND) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Investors however, have been notably more optimistic about Apcotex Industries recently, with the stock price up a worthy 13% to ₹109 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company’s shares.
Following this downgrade, Apcotex Industries’ dual analysts are forecasting 2021 revenues to be ₹5.0b, approximately in line with the last 12 months. Statutory earnings per share are anticipated to dip 9.7% to ₹2.90 in the same period. Previously, the analysts had been modelling revenues of ₹5.7b and earnings per share (EPS) of ₹6.20 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
It’ll come as no surprise then, to learn that the analysts have cut their price target 38% to ₹100.00. 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. There are some variant perceptions on Apcotex Industries, with the most bullish analyst valuing it at ₹120 and the most bearish at ₹79.85 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 Apcotex Industries’ revenue growth is expected to slow, with forecast 1.5% increase next year well below the historical 15% 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 10% per year. Factoring in the forecast slowdown in growth, it seems obvious that Apcotex Industries is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At least one analyst has provided forecasts out to 2022, which can be seen for 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. Thank you for reading.