L&T Technology Services Limited (NSE:LTTS) shareholders are probably feeling a little disappointed, since its shares fell 4.6% to ₹2,402 in the week after its latest quarterly results. L&T Technology Services reported ₹14b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of ₹17.63 beat expectations, being 6.2% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for L&T Technology Services from 16 analysts is for revenues of ₹63.8b in 2022 which, if met, would be a notable 15% increase on its sales over the past 12 months. Statutory earnings per share are predicted to surge 31% to ₹84.20. In the lead-up to this report, the analysts had been modelling revenues of ₹62.3b and earnings per share (EPS) of ₹81.45 in 2022. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
It will come as no surprise to learn that the analysts have increased their price target for L&T Technology Services 20% to ₹2,273on the back of these upgrades. 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. The most optimistic L&T Technology Services analyst has a price target of ₹3,057 per share, while the most pessimistic values it at ₹1,510. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of L&T Technology Services'historical trends, as next year's 15% revenue growth is roughly in line with 16% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 12% next year. So it's pretty clear that L&T Technology Services is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards L&T Technology Services following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on L&T Technology Services. Long-term earnings power is much more important than next year's profits. We have forecasts for L&T Technology Services going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for L&T Technology Services that you should be aware of.
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