Analysts Are More Bearish On Lemon Tree Hotels Limited (NSE:LEMONTREE) Than They Used To Be

Today is shaping up negative for Lemon Tree Hotels Limited (NSE:LEMONTREE) 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 the analysts have soured majorly on the business.

Following the downgrade, the current consensus from Lemon Tree Hotels' ten analysts is for revenues of ₹4.5b in 2022 which - if met - would reflect a sizeable 70% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 32% to ₹1.10. However, before this estimates update, the consensus had been expecting revenues of ₹5.4b and ₹0.66 per share in losses. 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 Lemon Tree Hotels

There was no major change to the consensus price target of ₹43.27, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Lemon Tree Hotels analyst has a price target of ₹54.00 per share, while the most pessimistic values it at ₹34.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Lemon Tree Hotels' past performance and to peers in the same industry. It's clear from the latest estimates that Lemon Tree Hotels' rate of growth is expected to accelerate meaningfully, with the forecast 70% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 1.3% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 27% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Lemon Tree Hotels 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 Lemon Tree Hotels. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to 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 Lemon Tree Hotels.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Lemon Tree Hotels analysts - going out to 2024, 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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