These Analysts Just Made An Incredible Downgrade To Their IIFL Finance Limited (NSE:IIFL) EPS Forecasts

The analysts covering IIFL Finance Limited (NSE:IIFL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from IIFL Finance's six analysts is for revenues of ₹55b in 2025, which would reflect an uncomfortable 17% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to dive 36% to ₹24.44 in the same period. Prior to this update, the analysts had been forecasting revenues of ₹67b and earnings per share (EPS) of ₹41.96 in 2025. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

Check out our latest analysis for IIFL Finance

Analysts made no major changes to their price target of ₹552, suggesting the downgrades are not expected to have a long-term impact on IIFL Finance's valuation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the IIFL Finance's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 22% by the end of 2025. This indicates a significant reduction from annual growth of 23% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10% annually for the foreseeable future. It's pretty clear that IIFL Finance's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for IIFL Finance. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that IIFL Finance's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on IIFL Finance after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with IIFL Finance, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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 with high insider ownership.

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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.