Need To Know: Analysts Just Made A Substantial Cut To Their Indiabulls Housing Finance Limited (NSE:IBULHSGFIN) Estimates

Market forces rained on the parade of Indiabulls Housing Finance Limited (NSE:IBULHSGFIN) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of ₹231 reflecting a 12% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the consensus from three analysts covering Indiabulls Housing Finance is for revenues of ₹30b in 2021, implying a stressful 41% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to crater 59% to ₹29.45 in the same period. Prior to this update, the analysts had been forecasting revenues of ₹35b and earnings per share (EPS) of ₹41.83 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.

See our latest analysis for Indiabulls Housing Finance

What's most unexpected is that the consensus price target rose 67% to ₹138, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Indiabulls Housing Finance analyst has a price target of ₹200 per share, while the most pessimistic values it at ₹75.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 41%, a significant reduction from annual growth of 17% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 41% next year.

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. Unfortunately analysts also downgraded their revenue estimates, although the forecast result is still roughly in line with that of the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Indiabulls Housing Finance going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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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