Earnings Miss: Devyani International Limited Missed EPS By 18% And Analysts Are Revising Their Forecasts

Shareholders might have noticed that Devyani International Limited (NSE:DEVYANI) filed its second-quarter result this time last week. The early response was not positive, with shares down 2.4% to ₹188 in the past week. Revenues were in line with forecasts, at ₹7.5b, although statutory earnings per share came in 18% below what the analysts expected, at ₹0.49 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, the most recent consensus for Devyani International from twelve analysts is for revenues of ₹31.0b in 2023 which, if met, would be a solid 16% increase on its sales over the past 12 months. Per-share earnings are expected to increase 4.2% to ₹2.35. Before this earnings report, the analysts had been forecasting revenues of ₹30.7b and earnings per share (EPS) of ₹2.24 in 2023. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of ₹210, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Devyani International at ₹241 per share, while the most bearish prices it at ₹102. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Devyani International's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 35% growth on an annualised basis. This is compared to a historical growth rate of 59% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 16% annually. So it's pretty clear that, while Devyani International's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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 Devyani International following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Devyani International going out to 2025, and you can see them free on our platform here.

It might also be worth considering whether Devyani International's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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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.