Bearish: Analysts Just Cut Their Graphite India Limited (NSE:GRAPHITE) Revenue and EPS estimates

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. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Graphite India's four analysts is for revenues of ₹38b in 2023, which would reflect a huge 24% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 41% to ₹36.50. Previously, the analysts had been modelling revenues of ₹43b and earnings per share (EPS) of ₹58.03 in 2023. 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.

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 6.9% to ₹591. 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 Graphite India analyst has a price target of ₹652 per share, while the most pessimistic values it at ₹475. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

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 Graphite India is forecast to grow faster in the future than it has in the past, with revenues expected to display 24% annualised growth until the end of 2023. If achieved, this would be a much better result than the 16% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 12% annually. So it looks like Graphite India is expected to grow faster than its competitors, at least for a while.

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, although our data indicates revenues are expected to perform better 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.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Graphite India's financials, such as concerns around earnings quality. Learn more, and discover the 2 other warning signs we've identified, 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. 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.