Analysts Are More Bearish On Burger King India Limited (NSE:BURGERKING) Than They Used To Be

One thing we could say about the analysts on Burger King India Limited (NSE:BURGERKING) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, Burger King India's four analysts are now forecasting revenues of ₹9.8b in 2022. This would be a huge 98% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 71% to ₹1.57. Yet prior to the latest estimates, the analysts had been forecasting revenues of ₹11b and losses of ₹0.45 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Burger King India

The consensus price target was broadly unchanged at ₹168, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Burger King India analyst has a price target of ₹250 per share, while the most pessimistic values it at ₹115. 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.

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. It's clear from the latest estimates that Burger King India's rate of growth is expected to accelerate meaningfully, with the forecast 98% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 19% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 25% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Burger King India to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Burger King India. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Burger King India.

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 Burger King India 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. 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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