Bearish: Analysts Just Cut Their ITD Cementation India Limited (NSE:ITDCEM) Revenue and EPS estimates

Today is shaping up negative for ITD Cementation India Limited (NSE:ITDCEM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 17% to ₹49.10 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following this downgrade, ITD Cementation India's twin analysts are forecasting 2021 revenues to be ₹28b, approximately in line with the last 12 months. Statutory earnings per share are supposed to dip 8.4% to ₹2.30 in the same period. Before this latest update, the analysts had been forecasting revenues of ₹35b and earnings per share (EPS) of ₹6.80 in 2021. Indeed, we can see that the analysts are a lot more bearish about ITD Cementation India's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for ITD Cementation India

Despite the cuts to forecast earnings, there was no real change to the ₹126 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ITD Cementation India analyst has a price target of ₹235 per share, while the most pessimistic values it at ₹67.14. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would also point out that the forecast 1.3% revenue decline is roughly in line with the historical trend, which saw revenues shrink 1.3% annually over the past five years Compare this with our data on other companies (with analyst coverage) in the industry, which in aggregate are forecast to see their revenue grow 6.9% next year. So it looks like ITD Cementation India's revenues are expected to decline at a slower rate than the wider industry.

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, and industry data suggests that ITD Cementation India's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on ITD Cementation India after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with ITD Cementation India, including its declining profit margins. For more information, you can click here to discover this and the 3 other flags we've identified.

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