Cause For Concern? One Analyst Thinks Indian Energy Exchange Limited's (NSE:IEX) Revenues Are Under Threat

Market forces rained on the parade of Indian Energy Exchange Limited (NSE:IEX) shareholders today, when the covering analyst downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the one analyst covering Indian Energy Exchange, is for revenues of ₹4.2b in 2023, which would reflect a considerable 14% reduction in Indian Energy Exchange's sales over the past 12 months. Statutory earnings per share are forecast to be ₹3.50, approximately in line with the last 12 months. Previously, the analyst had been modelling revenues of ₹4.9b and earnings per share (EPS) of ₹3.80 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

Check out the opportunities and risks within the IN Capital Markets industry.

The consensus price target fell 5.6% to ₹145, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Indian Energy Exchange analyst has a price target of ₹210 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2023. This indicates a significant reduction from annual growth of 15% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Indian Energy Exchange is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Indian Energy Exchange's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of Indian Energy Exchange's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Indian Energy Exchange going forwards.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Indian Energy Exchange going out as far as 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. 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.