Analysts Just Slashed Their Graphite India Limited (NSE:GRAPHITE) EPS Numbers

The latest analyst coverage could presage a bad day for Graphite India Limited (NSE:GRAPHITE), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Graphite India recently, with the stock price up a remarkable 16% to ₹372 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 the downgrade, the consensus from three analysts covering Graphite India is for revenues of ₹30b in 2024, implying a perceptible 4.6% decline in sales compared to the last 12 months. Per-share earnings are expected to shoot up 157% to ₹26.20. Previously, the analysts had been modelling revenues of ₹34b and earnings per share (EPS) of ₹30.40 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

Check out our latest analysis for Graphite India

It'll come as no surprise then, to learn that the analysts have cut their price target 7.7% to ₹445. 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. Currently, the most bullish analyst values Graphite India at ₹530 per share, while the most bearish prices it at ₹385. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Graphite India shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Graphite India's past performance and to peers in the same industry. We would also point out that the forecast 4.6% annualised revenue decline to the end of 2024 is better than the historical trend, which saw revenues shrink 19% annually over the past five years Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 15% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Graphite India to suffer worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Graphite India. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Graphite India's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Graphite India.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Graphite India analysts - going out to 2026, 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. 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.