Earnings Miss: Varroc Engineering Limited Missed EPS By 59% And Analysts Are Revising Their Forecasts

As you might know, Varroc Engineering Limited (NSE:VARROC) last week released its latest quarterly, and things did not turn out so great for shareholders. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at ₹19b, statutory earnings missed forecasts by an incredible 59%, coming in at just ₹2.12 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Varroc Engineering

Taking into account the latest results, the consensus forecast from Varroc Engineering's six analysts is for revenues of ₹81.8b in 2025. This reflects a reasonable 6.7% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to nosedive 43% to ₹19.70 in the same period. Before this earnings report, the analysts had been forecasting revenues of ₹86.2b and earnings per share (EPS) of ₹26.17 in 2025. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a pretty serious reduction to earnings per share numbers.

The consensus price target fell 5.3% to ₹604, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Varroc Engineering, with the most bullish analyst valuing it at ₹770 and the most bearish at ₹450 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. One thing stands out from these estimates, which is that Varroc Engineering is forecast to grow faster in the future than it has in the past, with revenues expected to display 9.1% annualised growth until the end of 2025. If achieved, this would be a much better result than the 12% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. So while Varroc Engineering's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Varroc Engineering. Sadly, they also downgraded their revenue forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Varroc Engineering analysts - going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Varroc Engineering , and understanding it should be part of your investment process.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.